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Year Gross Income
1988 $325,213
1989 346,593
1990 1321,265
1991 1229,757
1 The parties’ stipulation does not comport with
the amounts reflected in the tax returns. The Court
has chosen to follow the figures in the returns.
Kanter Yachts primarily relied on advertising to sell
yachts. The company expended approximately $51,000 to $74,000 in
advertising per year. Kanter Yachts had not sold a boat in any
of the 12 boat shows attended from 1987 through 1991. Manfred
Kanter (Kanter), proprietor of Kanter Yachts, did not believe
that petitioners represented Kanter Yachts during 1990.
OPINION
We must first decide whether petitioners were involved in
activities that were “not engaged in for profit” within the
meaning of section 183(c). Section 183(a), generally, provides
that, if an activity engaged in by an individual is not engaged
in for profit, no deduction attributable to such activity shall
be allowed, except as provided in section 183(b).4 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
4 In the case of an activity not engaged in for profit, sec.
183(b)(1) allows a deduction for expenses that are otherwise
deductible without regard to whether the activity is engaged in
for profit. Sec. 182(b)(2) allows a deduction for expenses that
would be deductible if such activity were engaged in for profit,
but only to the extent the total gross income derived from the
activity exceeds the deductions allowed by sec. 183(b)(1).
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