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Nonsoftware Software Activity Software Activity
Year Activity IncomeGross Receipts Expenses
1989 $67,889 $0 $5,917
1990 102,224 1,178 5,484
1991 104,780 0 10,405
1992 156,773 248 31,318
1993 163,838 94 24,908
1 This is the amount Mr. Flanagin reported on his 1993 original
separate return. An amended return was filed for 1993; however, it was
not made part of the record. The amended return reported more taxable
income than the original return and additional tax due. We believe,
therefore, that in 1993 Mr. Flanagin's nonsoftware activity income was
at least $63,838.
Since 1984, petitioners annual gross receipts from the software
activity never exceeded $1,200.
Petitioners reported losses from the software development
activity were as follows:
Year Loss
1984 ($11,237)
1985 (6,643)
1986 (11,565)
1987 (5,365)
1988 (2,038)
1989 (5,917)
1990 (4,306)
1991 (10,405)
1992 (31,070)
1993 (24,814)
OPINION
I. The Software Development Activity
Section 183(a) provides generally that, if an activity is
not engaged in for profit, no deduction attributable to such
activity shall be allowed except as provided in section 183(b).
Section 183(c) defines an "activity not engaged in for profit" as
"any activity other than one with respect to which deductions are
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