Kenneth C. & Becky J. Theisen - Page 5

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          telephone or party plan, or from mobile unit".  On their Federal            
          income tax returns for the years in issue, petitioners did not              
          disclose that they or Theisen Enterprises were engaged in an                
          Amway activity.  In fact, on both returns, line A of Schedule C,            
          "Principal business or profession, including product or service",           
          was left blank.                                                             
               Deductions are a matter of legislative grace.  New Colonial            
          Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).  Respondent's               
          determinations are presumed correct, and petitioners bear the               
          burden of proving otherwise.  Rule 142(a); Welch v. Helvering,              
          290 U.S. 111, 115 (1933).  However, respondent bears the burden             
          for any new matter pleaded in the answer.  Rule 142(a).                     
          Petitioner made a motion to that effect as to the section 183               
          issue, and the Court granted it.  Respondent acknowledged the               
          burden of proof as to the section 6662(b)(1) issue for both                 
               Section 183(a) disallows any deductions attributable to                
          activities not engaged in for profit except as provided under               
          section 183(b).  Taxpayers need not have a reasonable expectation           
          of profit.  However, the facts and circumstances must demonstrate           
          that they entered into the activity, or continued the activity,             
          with the actual and honest objective of making a profit.  Taube             
          v. Commissioner, 88 T.C. 464, 478 (1987); Dreicer v.                        
          Commissioner, 78 T.C. 642, 645 (1982), affd. without opinion 702            

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