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and that the taxpayer's primary purpose for engaging in the
activity must be for income or profit. Commissioner v.
Groetzinger, 480 U.S. 23, 35 (1987).
We have found that petitioner charged Murray less than the
fair market value to rent her property. Benefiting a related
party with a below-market rental agreement is evidence of the
absence of a profit objective. LaMusga v. Commissioner, T.C.
Memo. 1982-742; Sheridan v. Commissioner, T.C. Memo. 1958-215;
see also Jasionowski v. Commissioner, 66 T.C. 312 (1976) (lease
agreement with friend that provided for rent in the amount of the
total cost of the property's insurance and taxes held to lack
profit motive). Accordingly, we find that petitioner was not
engaged in the trade or business of renting her property during
the year at issue. Consequently, the loss incurred from the sale
of the property is not deductible under section 165(c)(1).
Held for the Production of Income
We now consider whether petitioner held the property for the
production of income so as to permit the loss from its sale to be
deducted under section 165(c)(2).
Petitioner testified that when she acquired the property she
did not intend to hold it for sale, but for rent. Petitioner
husband testified that petitioner spent considerable time
preparing the house for her brother to rent, to whom,
predominately for personal reasons, petitioner let the property
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