Discuss the extent to which Section 465 limits Taxpayers loss deductions, generates recapture income out of a previously allowed loss deductions, or allows the use of a loss carryover in the following situations:

(a) Taxpayer purchased a farm for $50,000 cash and his personal note for $400,000 secured by a mortgage. In the first two years of operation he put in an additional $50,000 each year, by way of cash and personal loans, for feed, fertilizer and other supplies; but things did not go well. In the first year of operations his loss was $80,000 and he had another $80,000 loss in the second year of operations. No principal was paid on the liability in either year.

(b) The facts are the same as in (a), above, except that the farm was acquired for $50,000 cash and a $400,000 of nonrecourse financing.

(c) The facts are the same as in (a), above, except that in the third year of operations when the farm broke even, Taxpayer converted his personal liability of $400,000 to a nonrecourse loan.

(d) The facts are the same as in (b), above, except that Taxpayer pays off $10,000 of the nonrecourse loan in year two.

(e) The facts are the same as in (b), above, except that the farm breaks even in year three and Taxpayer pays off $10,000 of the nonrecourse loan in year three.