- 9 -
to an activity not engaged in for profit. Section 183(b)
provides two exceptions to the general rule. The first, provided
by section 183(b)(1), permits deductions that otherwise would be
allowable without regard to whether the activity is engaged in
for profit; the second, provided by section 183(b)(2), permits
deductions that would be allowable if the activity were engaged
in for profit to the extent that the gross income from the
activity exceeds the deductions allowable pursuant to section
183(b)(1). 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." Petitioner bears
the burden of establishing that her photography activity was
engaged in for profit. Rule 142(a).
In order to carry that burden, a taxpayer must show that he
or she had an actual and honest objective of making a profit from
the activity. Dreicer v. Commissioner, 78 T.C. 642, 645 (1982),
affd. without opinion 702 F.2d 1205 (D.C. Cir. 1983). The
taxpayer's expectation, however, need not be a reasonable one.
Id. at 644-645; Golanty v. Commissioner, 72 T.C. 411, 425 (1979),
affd. without published opinion 647 F.2d 170 (9th Cir. 1981);
sec. 1.183-2(a), Income Tax Regs. The question whether the
requisite intention is present is one of fact and is to be
resolved based on consideration of all relevant circumstances,
with greater weight being given to objective factors than to mere
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011