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served by carrying on the undertakings separately or together,
and the similarity of the undertakings. Sec. 1.183-1(d)(1),
Income Tax Regs.4 The Commissioner generally accepts a
taxpayer's characterization of two or more undertakings as one
activity unless it is artificial or unreasonable. Id.
4 Sec. 1.183-1(d)(1), Income Tax Regs., provides in part:
(d) Activity defined--(1) Ascertainment of
activity. In order to determine whether, and to what
extent, section 183 and the regulations thereunder
apply, the activity or activities of the taxpayer must
be ascertained. For instance, where the taxpayer is
engaged in several undertakings, each of these may be a
separate activity, or several undertakings may
constitute one activity. In ascertaining the activity
or activities of the taxpayer, all the facts and
circumstances of the case must be taken into account.
Generally, the most significant facts and circumstances
in making this determination are the degree of
organizational and economic interrelationship of
various undertakings, the business purpose which is (or
might be) served by carrying on the various
undertakings separately or together in a trade or
business or in an investment setting, and the
similarity of various undertakings. Generally, the
Commissioner will accept the characterization by the
taxpayer of several undertakings either as a single
activity or as separate activities. The taxpayer's
characterization will not be accepted, however, when it
appears that his characterization is artificial and
cannot be reasonably supported under the facts and
circumstances of the case. If the taxpayer engages in
two or more separate activities, deductions and income
from each separate activity are not aggregated either
in determining whether a particular activity is engaged
in for profit or in applying section 183. * * *
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