[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: 26CFR1.182-2]

[Page 234-235]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.182-2  Definition of ``the business of farming.''

    Under section 182, the election to deduct expenditures incurred in 
the clearing of land is applicable only to a taxpayer who is engaged in 
``the business of farming'' during the taxable year. 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 
purposes of section 182, 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

[[Page 235]]

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 
for profit is not engaged in the business of farming. For purposes of 
section 182 and 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 Sec. 1.702-1.

[T.D. 6794, 30 FR 790, Jan. 26, 1965]