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paragraph (1) or (2) of section 212 [expenses incurred for the
production of income]." Section 183(b) permits deductions that
would be allowable only if the activity were engaged in for
profit, but such deductions may be taken only to the extent that
any gross income generated from the activity exceeds deductions
which are not dependent upon a profit objective (e.g., State and
local taxes under section 164).
Although a reasonable expectation of profit is not required,
the facts and circumstances must indicate that the taxpayer
entered into the activity, or continued the activity, with the
actual and honest objective of making a profit. Keanini v.
Commissioner, 94 T.C. 41, 46 (1990); Dreicer v. Commissioner, 78
T.C. 642, 645 (1982), affd. without published opinion 702 F.2d
1205 (D.C. Cir. 1983); sec. 1.183-2(a), Income Tax Regs. In
making this determination, more weight is accorded to objective
facts than to the taxpayer's statement of intent. Engdahl v.
Commissioner, 72 T.C. 659, 666 (1979); sec. 1.183-2(a), Income
Tax Regs. Petitioners bear the burden of proving that they
possessed the required profit objective. Rule 142(a); Dreicer v.
Commissioner, supra; Golanty v. Commissioner, 72 T.C. 411, 426
(1979), affd. without published opinion 647 F.2d 170 (9th Cir.
1981).
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