- 6 -
and have participated in various horse shows. Furthermore, in
1995 and 1996, petitioners were seeking to sell their ranch in
California and relocate to Texas, where purportedly lower costs
and a better market for Paso Fino horses render profitability
more likely.
OPINION
Taxpayers seeking to deduct expenses under section 162 must
establish that the underlying activity was engaged in for an
actual and honest profit objective. Dreicer v. Commissioner, 78
T.C. 642, 644-646 (1982), affd. without published opinion 702
F.2d 1205 (D.C. Cir. 1983). If a taxpayer's activity is deemed
not to be engaged in for the purposes of earning a profit, the
deductibility of expenses resulting from the activity is
restricted by section 183. Particularly, section 183(b)(2)
provides that expenses which result from an activity not engaged
in for profit, and which would be allowable only if the activity
were engaged in for profit, are deductible only to the extent of
income derived from the activity. Generally, taxpayers bear the
burden of proving that the activities in question were entered
into for a profit. Rule 142(a); Golanty v. Commissioner, 72 T.C.
411, 426 (1979), affd. without published opinion 647 F.2d 170
(9th Cir. 1981).
To determine whether a taxpayer has entered into an activity
for a profit, we must consider all of the facts and
circumstances, placing greater weight upon objective facts than
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