- 6 -
not engaged in for profit. Respondent further determined that
petitioners were liable for an accuracy-related penalty for each
year in issue pursuant to section 6662(a) for negligence or
disregard of rules or regulations. In addition, respondent made
certain computational adjustments as a result of the disallowance
of the Schedule C losses.3
Discussion
A. Activity for Profit
Section 162(a) allows deductions for ordinary and necessary
expenses in carrying on a trade or business. Section 183(a)
generally provides that an individual's deductions attributable
to an activity not engaged in for profit shall only be allowed to
the extent provided in section 183(b). Section 183(b) generally
limits the deductions from an activity not engaged in for profit
to the sum of (1) otherwise allowable deductions, and (2) any
other deductions attributable to the activity to the extent the
gross income from the activity exceeds the otherwise allowable
deductions. Section 183(c) defines an "activity not engaged in
for profit" as any activity other than one for which deductions
are allowable 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 162, or whether an
3 The computational adjustments affect the amount of
petitioners' Social Security benefits that are taxable for
certain years, and petitioners' medical expense deduction for
1994.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011