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In this instance, there was no organizational or economic
interrelationship between the two activities. Other than the
reporting of the expenses of both on the same Schedule F, the
activities were geographically and financially independent. No
business purpose was expressed other than Zane’s ability to use
his knowledge of dog breeding in cow breeding. The use of that
experience and knowledge by Zane is not, per se, a business
purpose and did not result in any economy of scale or symbiosis
between the two activities.
The cow and dairy farm activity was a separate pursuit. We
treat the dog breeding activity and the cow and dairy farm
activity as separate for purposes of our section 183 analysis.
Beginning in 1998, Zane claimed losses on Schedule F from
his cow and dairy farm activity which he reported along with
those of his dog breeding activity and described as “cattle
crops--dog breeding”. Subsequently, in 2001 he described the
activity as “organic dairy farm” on his Schedule F.
Respondent contends that Zane did not effectively enter into
the cow and dairy farm activity until 2001, whereas Zane contends
that the early activity involving the cattle was preliminary to
and an integral part of the expansion of that activity in 2001.
In 1998, Zane purchased a 400-acre farm, (Goose Hill), in upstate
New York where he also built his home. His Schedule F for the
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