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the claimed expenses to the extent such expenses exceed the
income generated by the activity for each taxable year at issue.
OPINION
We must decide whether section 183 applies to petitioner's
horse activity. Respondent maintains that section 183 limits the
amount of expenses petitioner is entitled to deduct to an amount
equal to the amount of gross income earned from his horse
activity. In contrast, petitioner contends that section 183 is
inapplicable because he conducted his horse activity with the
requisite profit motive. We agree with respondent.
Section 183 allows only specified deductions unless an
activity is engaged in for profit. Section 183(c) defines an
activity not engaged in for profit as any activity other than one
with respect to which deductions are allowable under section 162
or under paragraphs (1) or (2) of section 212. An activity
engaged in for profit is one in which the taxpayer has an actual
and honest objective of making a profit. Dreicer v.
Commissioner, 78 T.C. 642, 645 (1982), affd. without opinion 702
F.2d 1205 (D.C. Cir. 1983). This profit expectation need not
have been reasonable, but the activity must have been either
entered into or continued with a bona fide objective of making a
profit. Taube v. Commissioner, 88 T.C. 464, 478-479 (1987);
Dreicer v. Commissioner, supra at 644-645; sec. 1.183-2(a),
Income Tax Regs. Profit in this context means economic profit,
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