Terry F. and Carol J. Zdun - Page 10

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          Apple Orchard Not Engaged In For Profit                                     
               As we have decided that petitioners' undertakings are two              
          separate activities, we now consider the income and expenses of             
          the apple orchard activity separately in deciding whether the               
          apple orchard activity was conducted with a profit objective.               
          Section 183(a) generally limits the amount of expenses that a               
          taxpayer may deduct with respect to an activity "not engaged in             
          for profit" to the deductions provided in section 183(b).                   
          Section 183(b)(1) provides that deductions that would be                    
          allowable without regard to whether such activity is engaged in             
          for profit are to be allowed.  Section 183(b)(2) further provides           
          that deductions which would be allowable only if such activity              
          were engaged in for profit are to be allowed, but only to the               
          extent that the gross income derived from such activity during              
          the taxable year exceeds the deductions allowable under section             
          183(b)(1).  An activity is "not engaged in for profit" if it is             
          an activity other than one with respect to which deductions are             
          allowable for the taxable years under section 162 or under                  
          paragraph (1) or (2) of section 212.  Sec. 183(c).                          
               In determining whether an activity is engaged in for profit,           
          the taxpayer must show that he or she engaged in the activity               
          with an "actual and honest objective of making a profit."                   
          Dreicer v. Commissioner, 78 T.C. 642, 645 (1982), affd. without             







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