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believed that if his farm could be certified as organic, he would
be able to sell the milk at a price three times that of
conventional milk.
By the time of trial, Zane’s animal breeding was
progressing, and the farm was certified organic in 2006. His
gross revenues exceeded $100,000 for 2004, 2005, and 2006. Zane
expects the revenue to triple in 2007 because of the organic
certification. In operating this activity, Zane has consulted
with experts, done marketing, maintained separate checking
account records, and focused on ways to maximize revenue.
The following is an analysis of the nine factors, more fully
described above, as applicable to this activity.
1. Manner in Which the Activity Is Conducted--Zane
physically segregated the cow activity from the dog breeding
activity and, as of 2001, maintained a separate bank account for
the cow activity. He had a formal 7-year business plan that he
pursued throughout the years in issue. He took steps to maximize
his revenues and continually worked to show a profit.
Although for years before 2001 Zane reported the dog
breeding activity and the cow and dairy farm activity on a single
Schedule F, the activities were separately pursued and had
differing operations. Beginning around 2001, Zane hired Mr.
Hughes to be his farm manager. He gave him a place to live, the
use of a truck, and cash wages of around $30,000 per year.
Although Zane did not keep many formal records, he did approach
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