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section 183(b). Where there is no profit objective, section
183(b)(1) allows only deductions which are allowable independent
of profit objective, and section 183(b)(2) allows other
deductions only to the extent that they do not exceed gross
income derived from the activity reduced by the deductions
allowable under section 183(b)(1).
Any deductions allowable under section 183(b)(1) are to be
deducted from adjusted gross income in computing taxable income.
Jasionowski v. Commissioner, 66 T.C. 312, 320 (1976). These
deductions may be taken only if the taxpayer itemizes his
deductions. Rev. Rul. 75-14, 1975-1 C.B. 90. Respondent
concedes that petitioners have substantiated their house-related
expenses for interest and taxes and has allowed petitioners
itemized deductions for the interest and taxes in lieu of the
smaller standard deductions claimed by them on their returns.
Petitioners' 1991 and 1992 Schedules C showed gross income
from their research activity in the amounts of $1,454 and $1,833,
respectively. For such taxable years, the itemized deductions,
in the amounts of $6,553 and $6,911, respectively, allowed under
sections 163, 164, and 183(b)(1), exceed the gross income claimed
from petitioners' research activity. Therefore, petitioners are
precluded from taking any further deductions for expenses related
to such activity even if substantiated. Sec. 183(b)(2). We
therefore sustain respondent's determination on this issue.
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