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provided in section 183(b). In the case of an activity not
engaged in for profit, section 183(b)(1) allows a deduction for
expenses that are otherwise deductible without regard to whether
the activity is engaged in for profit. Section 183(b)(2) allows
a deduction for expenses that would be deductible only if the
activity were engaged in for profit, but only to the extent that
the total gross income derived from the activity exceeds the
deductions allowed by section 183(b)(1).
An "activity not engaged in for profit" is any activity for
which deductions would not be allowed under section 162 or under
paragraph (1) or (2) of section 212. See sec. 183(c). Section
162 allows a deduction for all the ordinary and necessary
expenses paid or incurred in carrying on a trade or business.
Section 212 allows a deduction for all the ordinary and necessary
expenses paid or incurred for the production or collection of
income, or for the management, conservation, or maintenance of
property held for the production of income. The profit standards
applicable to section 212 are the same as those applicable to
section 162. See Antonides v. Commissioner, 893 F.2d 656, 659
(4th Cir. 1990), affg. 91 T.C. 686 (1988).
For a taxpayer to deduct expenses of an activity pursuant to
section 162, the taxpayer must show that he or she engaged in the
activity with an actual and honest objective of making a profit.
See sec. 183; Ronnen v. Commissioner, 90 T.C. 74, 91 (1988);
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Last modified: May 25, 2011