- 12 -
planting, mature timber harvesting, and haying undertakings may
be treated as one activity. We therefore reject respondent’s
determination in the deficiency notice. By treating the
undertakings as one activity, we note that petitioner reported
$7,500 from the sale of timber, $4,155 from the sale of hay, and
claimed farm expenses of $6,295 in 1999. Accordingly, petitioner
had a net profit from the farming activity in 1999, and we
therefore do not sustain respondent’s disallowance of the claimed
farm expenses as to 1999. Furthermore, we shall consider all
petitioner’s farming undertakings as one activity in analyzing
whether petitioner conducted the farming activity with an actual
and honest objective of making a profit during 1998 and 2000.
2. Whether the Section 183(d) Presumption Applies
We next address whether petitioner is entitled to the
section 183(d) presumption of a profit motive. Petitioner
contends that he qualifies for the profit motive presumption
under section 183(d) for 1998 and 2000 by arguing that the gross
income derived from the farming activity exceeded the deductions
attributable to the activity in 1999, 2001, 2003, and 2004. We
disagree. Section 183(d) presumes an activity is conducted for
profit if the gross income exceeds the attributable deductions
for 33 out of 5 consecutive years (the gross income test).4 The
3We note that sec. 1.183-1(c)(1), Income Tax Regs., has not
been amended to conform to the statutory changes made in 1986.
(continued...)
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011