- 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 Next
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