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1999 tax year reflects that other than depreciation and repairs
of the property, most of the expenditures were for the dog
breeding activity, including dog training and showing. No
expenses were claimed that appeared to relate directly to the cow
and dairy farm activity. Likewise, for the 2000 tax year most
were for the dog breeding activity, and only a relatively small
portion could have been connected with the cow and dairy farm
activity.
For 2001 two Schedules F were included, and the one labeled
“Cattle Crops--Dog Breeding” contained substantially increased
expenditures. Relatively large amounts were spent on items
relating to cows such as feed and trucking expenses. The second
Schedule F was labeled “Organic Dairy Farm” and contained claimed
expenditures and depreciation totaling $98,470. These
circumstances reflect that Zane did not begin to pursue the dairy
farm idea until 2001. Any expenditures nominally connected with
cows before 2001 would have, in any event, been considered
startup expenditures (which are to be capitalized) and were
incurred before the implementation of the plan to pursue the
dairy farm. See Toth v. Commissioner, 128 T.C. 1, 4-6 (2007).
Accordingly, we agree with respondent that Zane and Shannon are
not entitled to claim any losses in connection with his cow
activity before 2001.
With respect to 2001, Zane had studied and researched the
various types of cattle that could be bred. Zane recognized that
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