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Petitioners have never kept a set of books or records for
their breeding activity. They have never maintained any records
on the lineage, birth, or disposition of their cattle.
Mr. Vallette enjoys working with cattle. He grew up around
cattle, and the cattle industry is second nature to him.
OPINION
Respondent disallowed petitioners' losses from their
breeding activity because she determined that the activity was
"not engaged in for profit" under section 183. Section 183
generally limits the deductions for an activity not entered into
for profit. Sec. 183(b). An activity is not engaged in for
profit if deductions are not allowable for the taxable year under
section 162 or section 212(1) or (2). Sec. 183(c). Section 162
allows individuals to deduct ordinary and necessary expenses
connected with the conduct of a trade or business. Section
212(1) and (2) allows individuals to deduct expenses for the
production or collection of income, or for the management,
conservation, or maintenance of property held for the production
of income. Westbrook v. Commissioner, 68 F.3d 868, 875 (5th Cir.
1995), affg. T.C. Memo. 1993-634.
An individual engages in an activity for profit for purposes
of section 183 if he or she entered into, or continued, the
activity "with the actual and honest objective of making a
profit". Dreicer v. Commissioner, 78 T.C. 642, 645 (1982), affd.
without published opinion 702 F.2d 1205 (D.C. Cir. 1983).
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