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OPINION
Under section 183(b)(2), if an activity is not engaged in for
profit, expenses relating thereto are allowable only to the extent
gross income derived from the activity exceeds deductions allowable
under section 183(b)(1) without regard to whether the activity
constitutes a for-profit activity. See Allen v. Commissioner, 72
T.C. 28, 33 (1979).
For purposes of section 183, an activity is not considered
engaged in for profit unless it is conducted by the taxpayer with an
actual and honest objective of making a profit. See Antonides v.
Commissioner, 91 T.C. 686, 693-694 (1988), affd. 893 F.2d 656 (4th
Cir. 1990); Dreicer v. Commissioner, 78 T.C. 642, 645 (1982), affd.
without opinion 702 F.2d 1205 (D.C. Cir. 1983); Barter v.
Commissioner, T.C. Memo. 1991-124, affd. without published opinion
980 F.2d 736 (9th Cir. 1992); Westbrook v. Commissioner, T.C. Memo.
1993-634, affd. 68 F.3d 868 (5th Cir. 1995).
The regulations under section 183 provide a nonexclusive list
of factors to consider in determining whether an activity is engaged
in for profit. Such factors include: (1) The manner in which the
taxpayer carries on the activity; (2) the expertise of the taxpayer
or his advisers; (3) the time and effort expended by the taxpayer in
carrying on the activity; (4) the expectation that assets used in
the activity may appreciate in value; (5) the success of the
taxpayer in carrying on other similar or dissimilar activities;
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Last modified: May 25, 2011