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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
years.
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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