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allowed a deduction in excess of gross income attributable to an
activity if the activity is not engaged in for profit. An
activity not engaged in for profit is "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." Sec. 183(c). Therefore, whether an activity is
engaged in for profit is determined with reference to sections
162 and 212.
Deductions are allowed under section 162(a) for all ordinary
and necessary expenses of carrying on an activity that
constitutes a trade or business. The Supreme Court has stated
that "to be engaged in a trade or business, the taxpayer must be
involved in the activity with continuity and regularity and * * *
the taxpayer's primary purpose for engaging in the activity must
be for income or profit. A sporadic activity, a hobby, or an
amusement diversion does not qualify." Commissioner v.
Groetzinger, 480 U.S. 23, 35 (1987). To be entitled to a trade
or business expense deduction, the taxpayer must have an "actual
and honest objective of making a profit." Dreicer v.
Commissioner, 78 T.C. 642, 645 (1982), affd. without opinion 702
F.2d 1205 (D.C. Cir. 1983).
7(...continued)
or under paragraph (1) or (2) of section 212.
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