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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 objective 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 case. Keanini v. Commissioner, 94 T.C.
41, 46 (1990); sec. 1.183-2(b), Income Tax Regs. The burden of
proving the requisite profit objective is on the taxpayer. Rule
142(a); Allen v. Commissioner, supra at 34.
7(...continued)
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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