[Code of Federal Regulations]
[Title 26, Volume 1]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.175-3]

[Page 205]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.175-3  Definition of ``the business of farming.''

    The method described in section 175 is available only to a taxpayer 
engaged in ``the business of farming''. A taxpayer is engaged in the 
business of farming if he cultivates, operates, or manages a farm for 
gain or profit, either as owner or tenant. For the purpose of section 
175, a taxpayer who receives a rental (either in cash or in kind) which 
is based upon farm production is engaged in the business of farming. 
However, a taxpayer who receives a fixed rental (without reference to 
production) is engaged in the business of farming only if he 
participates to a material extent in the operation or management of the 
farm. A taxpayer engaged in forestry or the growing of timber is not 
thereby engaged in the business of farming. A person cultivating or 
operating a farm for recreation or pleasure rather than a profit is not 
engaged in the business of farming. For the purpose of this section, the 
term farm is used in its ordinary, accepted sense and includes stock, 
dairy, poultry, fish, fruit, and truck farms, and also plantations, 
ranches, ranges, and orchards. A fish farm is an area where fish are 
grown or raised, as opposed to merely caught or harvested; that is, an 
area where they are artificially fed, protected, cared for, etc. A 
taxpayer is engaged in ``the business of farming'' if he is a member of 
a partnership engaged in the business of farming. See paragraphs 
(a)(8)(i) and (c)(1)(iv) of Sec. 1.702-1.

[T.D. 6649, 28 FR 3762, Apr. 18, 1963]