REMUZZI V. COMMISSIONER T.C.M. 1988-8 (1988) CASE BRIEF

REMUZZI V. COMMISSIONER

T.C.M. 1988-8 (1988)

NATURE OF THE CASE: Remuzzi (P) challenged deficiencies in that IRS (D) disallowed expenses incurred from P's farm based on the determination that it was not an 'activity not engaged in for profit' pursuant to I.R.C. 183.

FACTS: P is an orthopedic surgeon. His wife is a housewife. Presently, they and their five children live in Leesburg on a 74-acre farm. In early 1976, P began to treat Payne, who was then a tenant on a farm. P told Payne of his desire to buy a farm and discussed the possibility of Payne's being a tenant on the farm. P loaned Payne $15,000 and Payne agreed to become a tenant on P's farm if P purchased a suitable property. P purchased property that consisted of about 35 acres of pasture and 40 acres of woods. A main house, tenant house, and various farm buildings were situated on five acres. The property was in complete disrepair, and had not been operated as a farm for about ten years. Payne agreed to move to the property, repair it, and maintain it, in return for the right to live in the tenant house rent free and the right to graze his small herd of cattle on the property. Payne was to repay his loan by giving P half of the calves born to the herd until the fair market value of the calves equaled the amount of the loan. Thereafter Payne was to split his profits from raising cattle with P. Payne brought to the property his cattle herd, which numbered thirty head, and his farm equipment, which consisted of a tractor, a bushhog, and a small combine. Payne repaired fences and bushhogged pasture land. Payne removed his herd from the property because there was not enough fenced land with pasturage on the property to support the herd and returned it when the fences were repaired. Payne was no longer living up to his agreement and P required him to begin paying rent on the tenant house. P had him sign a note for the $15,000 loan. Payne became mentally unable to function and the local sheriff began repossessing his property, including his cattle. After Payne was committed, P obtained a default judgment against him for the $13,800 balance of the loan. P's oldest son, who was ten at the time, assumed responsibility for feeding the few cattle that P owned. P hired college students to perform other necessary maintenance work. Revenues for 5 years were virtually nonexistent. Losses amounted do almost$160K. D determined that their farm losses were incurred in an activity not entered into for profit. P petitioned.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

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