- 10 -
1. Whether the Undertakings May Be Treated as One Activity
Respondent argues that we may not aggregate petitioner’s tree-
planting, mature timber harvesting, and haying undertakings as
one activity. We disagree.
Multiple undertakings of a taxpayer may be treated as one
activity if the undertakings are sufficiently interconnected.
Sec. 1.183-1(d)(1), Income Tax Regs. The most important factors
in making this determination are the degree of organizational and
economic interrelationship of the undertakings, the business
purpose served by carrying on the undertakings separately or
together, and the similarity of the undertakings. Id. The
Commissioner generally accepts the taxpayer’s characterization of
two or more undertakings as one activity unless the
characterization is artificial or unreasonable. Id.
We have considered these and other factors in determining
whether the taxpayer’s characterization is unreasonable. The
factors so considered include: (a) Whether the undertakings are
conducted at the same place; (b) whether the undertakings were
part of the taxpayer’s efforts to find sources of revenue from
his or her land; (c) whether the undertakings were formed as
separate businesses; (d) whether one undertaking benefited from
the other; (e) whether the taxpayer used one undertaking to
advertise the other; (f) the degree to which the undertakings
shared management; (g) the degree to which one caretaker oversaw
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011