Bernard Michael Reed - Page 5

          6001; Meneguzzo v. Commissioner, 43 T.C. 824, 831-832 (1965).               
          Moreover, deductions are strictly a matter of legislative grace,            
          and a taxpayer has the burden of establishing that he or she is             
          entitled to any deduction claimed on a return.  Deputy v. du                
          Pont, 308 U.S. 488, 493 (1940); New Colonial Ice Co. v.                     
          Helvering, 292 U.S. 435, 440 (1934).                                        
               Section 162(a) allows as a deduction "all the ordinary and             
          necessary business expenses paid or incurred during the taxable             
          year in carrying on any trade or business".  Where an individual            
          conducts an activity that is not engaged in for profit, section             
          183 limits the allowable deductions.  To be engaged in a trade or           
          business within the meaning of section 162, "the taxpayer must be           
          involved in the activity with continuity and regularity and * * *           
          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).                                                              
               Whether petitioner engaged in the water purifier or real               
          estate business for profit depends on whether the activity was              
          undertaken with an "actual and honest objective" of making a                
          profit.  Elliott v. Commissioner, 90 T.C. 960, 970 (1988), affd.            
          without published opinion 899 F.2d 18 (9th Cir. 1990); Fuchs v.             
          Commissioner, 83 T.C. 79, 98 (1984); Dreicer v. Commissioner, 78            
          T.C. 642, 644-645 (1982), affd. without opinion 702 F.2d 1205               
          (D.C. Cir. 1983).  While a reasonable expectation of a profit is            
          not required, petitioner must have entered into the activity, or            

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