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This terminology is defined in section 183(c) as “any activity
other than one with respect to which deductions are allowable for
the taxable year under section 162 [trade or business] or under
paragraph (1) or (2) of section 212 [expenses incurred for the
production of income].” Section 183(b) permits deductions that
would be allowable only if the activity were engaged in for
profit, but such deductions may be taken only to the extent that
any gross income generated from the activity exceeds deductions
that are not dependent upon a profit objective (e.g., State and
local taxes under section 164).
Although a reasonable expectation of profit is not required,
the facts and circumstances must indicate that the taxpayer
entered into the activity or continued the activity with the
actual and honest objective of making a profit. See Keanini v.
Commissioner, 94 T.C. 41, 46 (1990); Dreicer v. Commissioner, 78
T.C. 642, 645 (1982), affd. without opinion 702 F.2d 1205 (D.C.
Cir. 1983); sec. 1.183-2(a), Income Tax Regs. In making this
determination, more weight is accorded to objective facts than to
the taxpayer’s statement of intent. See Engdahl v. Commissioner,
72 T.C. 659, 666 (1979); sec. 1.183-2(a), Income Tax Regs.
Petitioner bears the burden of proving that she possessed the
required profit objective. See Rule 142(a); Dreicer v.
Commissioner, supra; Golanty v. Commissioner, 72 T.C. 411, 426
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