William James Courville - Page 5

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               Section 183(a) provides generally that, if an activity is              
          not engaged in for profit, no deduction attributable to such                
          activity shall be allowed.  Section 183(b)(1), however, provides            
          that deductions that are allowable without regard to whether the            
          activity is engaged in for profit shall be allowed.  Section                
          183(b)(2) further provides that deductions that would be                    
          allowable only if the activity were engaged in for profit shall             
          be allowed, "but only to the extent that the gross income derived           
          from such activity for the taxable year exceeds the deductions              
          allowable by reason of" section 183(b)(1).                                  
               Section 183(c) defines an activity not engaged in for profit           
          as "any activity other than one with respect to which deductions            
          are allowable for the taxable year under section 162 or under               
          paragraph (1) or (2) of section 212."  We inquire whether the               
          taxpayer is engaged in the activity with the "actual and honest             
          objective of making a profit".  Ronnen v. Commissioner, 90 T.C.             
          74, 91 (1988); Dreicer v. Commissioner, 78 T.C. 642, 645 (1982),            
          affd. without opinion 702 F.2d 1205 (D.C. Cir. 1983).  The                  
          taxpayer's expectation of profit need not be a reasonable one,              
          but there must be a good faith objective of making a profit.                
          Dreicer v. Commissioner, supra at 645; sec. 1.183-2(a), Income              
          Tax Regs.  The determination of whether the requisite profit                
          objective exists is to be resolved on the basis of all the                  
          surrounding facts and circumstances of the case.  Golanty v.                





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