Walter J. Piszczek - Page 8

                                        - 8 -                                         

          to deduct his expenditures currently.  Respondent contends that             
          petitioner lacked the necessary profit objective.  Respondent               
          further contends that even if petitioner engaged in the Windmill            
          Distillery activity for profit, his expenditures were to acquire            
          or improve land or depreciable property and, therefore,                     
          petitioner is not entitled to any deduction under section 174.              
          Since we agree with respondent that petitioner did not engage in            
          the activity for profit, we do not reach the question whether               
          petitioner's expenditures were to acquire or improve land or                
          depreciable property.                                                       
              In determining whether an activity is engaged in for profit            
          for purposes of section 174, courts have found it helpful to                
          consider the regulations issued, and cases that have arisen,                
          under section 183.  See, e.g., Nickeson v. Commissioner, 962 F.2d           
          973 (10th Cir. 1992), affg. Brock v. Commissioner, T.C. Memo.               
          1989-641; Independent Elec. Supply, Inc. v. Commissioner, 781               
          F.2d 724 (9th Cir. 1986), affg. T.C. Memo. 1984-472.  The section           
          183 cases indicate that whether an individual engages in an                 
          activity for profit depends on whether he or she entertains an              
          actual and honest profit objective in engaging in the activity.             
          The taxpayer's expectations do not have to be reasonable or                 
          realistic, but simply honest.  Burger v. Commissioner, 809 F.2d             
          355, 358 (7th Cir. 1987), affg. T.C. Memo. 1985-523.   Whether a            
          taxpayer conducts an activity with the requisite profit intent              
          rests on the facts of the case.  Golanty v. Commissioner, 72 T.C.           
          411, 426 (1979), affd. without published opinion 647 F.2d 170               


Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  Next

Last modified: May 25, 2011