- 5 - sections 165(c) and (f) and 166(d)(1) and (2). Petitioners assert that the loss related to Southern Express was incurred and proximately related to petitioner's trade or business of promoting, developing, organizing, and financing startup businesses, and is thus ordinary under section 165(a) and (c)(1) or, in the alternative, a business bad debt under section 166(a). Section 165(a) provides, "There shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise." In the case of an individual, the deduction under section 165(a) is limited to certain circumstances, including losses incurred in a trade or business. Sec. 165(c)(1). Petitioner asserts that he is engaged in a trade or business of promoting, developing, organizing, and financing startup businesses. We disagree. To be engaged in a trade or business, an individual must be involved in an activity with continuity and regularity, and the primary purpose for engaging in the activity must be for income or profit. Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987). A sporadic activity, a hobby, or an amusement diversion does not qualify. Id. Whether an individual is carrying on a trade or business requires an examination of the facts involved in each case. Higgins v. Commissioner, 312 U.S. 212, 217 (1941). Petitioner bears the burden of proving that he was engaged in aPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
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