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petitioner's income from the artist activity as miscellaneous
income from the sale of drawings and short-term capital gain
from the sale of art supplies.
Discussion
General Requirements
The threshold issue for decision is whether petitioner's
artist activity was "not engaged in for profit" within the
meaning of section 183(c). Section 183(a) provides generally
that if an activity is not engaged in for profit, no deduction
attributable to such activity shall be allowed, except as
otherwise provided in section 183(b).4 Section 183(c) defines an
activity not 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
4Sec. 183(b)(1) permits a deduction for expenses that are
otherwise deductible without regard to whether the activity is
engaged in for profit, such as interest and personal property
taxes. Sec. 183(b)(2) permits a deduction for expenses that
would be deductible only if the activity were engaged in for
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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