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Petitioners attended horseraces, watched their horses race, and
gambled on horses at various times.
During the years at issue, petitioners filed their tax
returns after the due date for each year. Petitioners filed
their tax returns for the tax years 1987, 1988, and 1989 on
August 23, 1991, and their tax return for the tax year 1990 on
June 19, 1992. On March 15, 1993, respondent mailed petitioners
a notice of deficiency for each of the taxable years 1987, 1988,
1989, and 1990.
OPINION
The first issue we must decide is whether petitioners' horse
racing and breeding operation was an activity "not engaged in for
profit" as defined in section 183. Section 183(a) provides
generally that no deduction attributable to an activity which is
not engaged in for profit is allowed except as provided in
section 183(b). Section 183(b)(1) allows those deductions which
are otherwise allowable regardless of profit objective. Section
183(b)(2) allows those deductions which would be allowable if the
activity were engaged in for profit, but only to the extent that
gross income attributable to the activity exceeds the deductions
permitted by section 183(b)(1). Section 183(c) defines "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."
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