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In the notice of deficiency, respondent disallowed the
losses claimed on the Schedules C. Other adjustments made in the
notice of deficiency either give effect to these disallowances or
are not in dispute.
Discussion
According to petitioners, their Amway activity, at
all relevant times, was a trade or business. Therefore,
petitioners argue that the expenses they incurred in carrying
on this activity should be allowed as deductions. See sec.
162(a) (generally allowing deductions for the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business). Respondent argues that
petitioners were not carrying on a trade or business because they
lacked the requisite profit objective, and petitioners are not,
therefore, entitled to the deductions they claim, except to the
extent allowed by section 183.6 For the following reasons, we
6 In relevant part, sec. 183 provides:
SEC. 183(a). General Rule.–In the case of an
activity engaged in by an individual or an S
corporation, if such activity is not engaged in for
profit, no deduction attributable to such activity
shall be allowed under this chapter except as
provided in this section.
(b) Deductions Allowable.–In the case of an
activity not engaged in for profit to which subsection
(a) applies, there shall be allowed--
(continued...)
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