G. Dastgir and Mary A. Qureshi - Page 15

               None of the factors enunciated in section 1.183-2(b), Income           
          Tax Regs., favors petitioners other than the absence of personal            
          pleasure or recreation factor.  We conclude, and thus hold, that            
          petitioner’s investment in the FoodSource container was not made            
          with an actual and honest profit objective.  Petitioners therefore          
          are not entitled to the depreciation deduction for 1984.10                  
               c.  Business Loss                                                      
               Petitioners have the burden of establishing that petitioner            
          sustained a loss in a transaction entered into for profit in 1984.          
          Section 165 provides as follows:                                            
               SEC. 165. LOSSES.                                                      
                    (a) General Rule.--There shall be allowed as a                    
               deduction any loss sustained during the taxable year and               
               not compensated for by insurance or otherwise.                         
                       *     *     *     *      *     *     *                         
                    (c) Limitation On Losses Of Individuals.-- In the                 
               case of an individual, the deduction under subsection (a)              
               shall be limited to--                                                  
                       *     *     *     *      *     *     *                         
                         (2) losses incurred in any transaction                       
                    entered into for profit, though not connected                     
                    with a trade or business, * * *                                   

          Section 1.165-1(b), Income Tax Regs., provides: “To be allowable as         
          a deduction under section 165(a), a loss must be evidenced by               

               10   In light of these holdings, we need not determine                 
          petitioner’s adjusted basis for purposes of investment tax credit           
          and depreciation.                                                           

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