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Lokken, Federal Taxation of Income, Estates and
Gifts, par. 20.1.6, at 20-19 (2d ed. 1989)].
Issue 1. Whether Petitioner Was in a Trade or Business in 1986
Expenses incurred in a trade or business are generally fully
deductible. However, an activity must be engaged in for income
or profit in order to constitute a trade or business.
Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987). This
requires the taxpayer to have an "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
pub. op 702 F.2d 1205 (D.C. Cir. 1983). The taxpayer may have a
bona fide objective of making a profit, even if the expectation
of profit is not reasonable. Hulter v. Commissioner, 91 T.C.
371, 393 (1988); Allen v. Commissioner, 72 T.C. 28, 33 (1979);
Dunn v. Commissioner, 70 T.C. 715, 720 (1978), affd. without
published opinion 607 F.2d 995 (2d Cir. 1979), affd. on another
issue 615 F.2d 578 (2d Cir. 1980). Whether a taxpayer has the
requisite actual and honest objective of making a profit is a
question of fact to be resolved on the basis of all of the facts
and circumstances of the particular case. Golanty v.
Commissioner, 72 T.C. 411, 426 (1979), affd. without published
opinion 647 F.2d 170 (9th Cir. 1981); Dunn v. Commissioner, 70
T.C. at 720. The taxpayer bears the burden of proof on this
issue. Rule 142(a).
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