Lloyd Patterson - Page 4

                                        - 4 -                                         
          building during 1991 and for several years thereafter.  We find             
          that petitioner never made any serious attempt to rent the                  
               Respondent contends that petitioner had not yet begun his              
          trade or business in 1991.  Respondent argues that petitioner's             
          expenses, other than those conceded by respondent, are start-up             
          expenses paid in connection with a trade or business, and may be            
          deductible under section 195 if and when he begins to operate his           
          apartment building as a business.                                           
               Petitioner's rental expenses are deductible under sections             
          162 or 212 only if his use of the property constituted an                   
          activity engaged in for profit.  Sec. 183(a).  The test to                  
          determine whether an activity is engaged in for profit is whether           
          the individual engaged in the activity with the "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).  The taxpayer's expectation of earning a profit           
          need not be reasonable, but the taxpayer must establish that the            
          activities were continued with a bona fide profit objective.                
          Dreicer v. Commissioner, supra; Hager v. Commissioner, 76 T.C.              
          759, 784 (1981); sec. 1.183-2(a), Income Tax Regs.  Whether the             
          taxpayer had such an objective must be determined by reference to           
          all the surrounding facts and circumstances, and greater weight             
          is given to such facts than to the taxpayer's statement of                  
          intent.  Dreicer v. Commissioner, supra.  The regulations set               

Page:  Previous  1  2  3  4  5  6  7  8  9  Next

Last modified: May 25, 2011