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Section 183(c) defines an activity not in 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.”
Deductions are allowed under section 162 for the ordinary
and necessary expenses of carrying on an activity that
constitutes the taxpayer’s trade or business. Deductions are
allowed under section 212 for expenses paid or incurred in
connection with an activity engaged in for the production or
collection of income, or for the management, conservation, or
maintenance of property held for the production of income. With
respect to either section, however, the taxpayer must demonstrate
a profit objective for the activities in order to deduct
associated expenses. Jasionowski v. Commissioner, 66 T.C. 312,
320-322 (1976); sec. 1.183-2(a), Income Tax Regs. The profit
standards applicable to section 212 are the same as those used in
section 162. See Agro Science Co. v. Commissioner, 934 F.2d 573,
576 (5th Cir. 1991), affg. T.C. Memo. 1989-687; Antonides v.
Commissioner, 893 F.2d 656, 659 (4th Cir. 1990), affg. 91 T.C.
686 (1988); Allen v. Commissioner, 72 T.C. 28, 33 (1979); Rand v.
Commissioner, 34 T.C. 1146, 1149 (1960).
3(...continued)
profit, but only to the extent that the gross income derived from
the activity exceeds the deductions allowed by sec. 183(b)(1).
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