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“the taxpayer’s primary purpose for engaging in the activity must
be for income or profit”. Commissioner v. Groetzinger, 480 U.S.
23, 35 (1987); see also Warden v. Commissioner, T.C. Memo. 1995-
176, affd. without published opinion 111 F.3d 139 (9th Cir.
1997).
This case is appealable to the Court of Appeals for the
Ninth Circuit, which applies a primary purpose standard to test
whether an alleged business activity has the requisite profit
motive under sections 162 and 183. Before a deduction is
allowed, “‘it must be shown that the activity was entered into
with the dominant hope and intent of realizing a profit.’”
Vorsheck v. Commissioner, 933 F.2d 757, 758 (9th Cir. 1991)
(quoting Brannen v. Commissioner, 722 F.2d 695, 704 (11th Cir.
1984), affg. 78 T.C. 471 (1982)); see also Wolf v. Commissioner,
4 F.3d 709, 713 (9th Cir. 1993), affg. T.C. Memo. 1991-212;
Machado v. Commissioner, T.C. Memo. 1995-526, affd. without
published opinion 119 F.3d 6 (9th Cir. 1997); Warden v.
Commissioner, supra. We apply that standard here.
Whether the requisite profit objective exists is a question
of fact to be resolved after considering all the pertinent facts
and circumstances. See Golanty v. Commissioner, 72 T.C. 411, 426
(1979), affd. without published opinion 647 F.2d 170 (9th Cir.
1981); sec. 1.183-2(b), Income Tax Regs. The taxpayer’s
expectation of profit need not be reasonable, but it must be bona
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