- 36 -
be allowed", except as otherwise provided in section 183(b).12
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."
The test for determining whether an individual is carrying
on a trade or business under section 183 is whether the
taxpayer's actual and honest objective in engaging in the
activity is to make a profit. Dreicer v. Commissioner, 78 T.C.
642, 645 (1982), affd. without opinion 702 F.2d 1205 (D.C. Cir.
1983); sec. 1.183-2(a), Income Tax Regs. While a taxpayer's
expectation of profit need not be reasonable, there must be a
good faith objective of making a profit. Allen v. Commissioner,
72 T.C. 28, 33 (1979); sec. 1.183-2(a), Income Tax Regs.
To determine whether the requisite profit objective exists,
we examine a variety of facts. Engdahl v. Commissioner, 72 T.C.
659, 666 (1979); sec. 1.183-2(a), Income Tax Regs. Thus, the
determination of whether the requisite profit objective exists
depends upon all the surrounding facts and circumstances of the
12 Sec. 183(b)(1) provides that deductions which would be
allowable without regard to whether such activity is engaged in
for profit shall be allowed. Sec. 183(b)(2) provides that
deductions which would be allowable only if such activity is
engaged in for profit shall be allowed "but only to the extent
that the gross income derived from such activity for the taxable
year exceeds the deductions allowable by reason of paragraph
(1)."
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