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taxable year under section 162 or under paragraph (1) or (2) of
section 212. Sec. 183(c).
Section 162(a) allows as a deduction all the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business. Where an activity does not
constitute a trade or business, section 212 allows as a deduction
all the ordinary and necessary expenses paid or incurred during
the taxable year for the production or collection of income, or
the management, conservation, or maintenance of property held for
the production of income. Sec. 212(1) and (2).
In order to establish that an activity was engaged in for
profit, the Court of Appeals for the Ninth Circuit, to which this
case is appealable, has stated that the taxpayer must show that
she engaged in the activity with the primary purpose of making a
profit. Wolf v. Commissioner, 4 F.3d 709, 713 (9th Cir. 1993),
affg. T.C. Memo. 1991-212. The taxpayer must enter into the
activity "with the dominant hope and intent of realizing a
profit". Independent Elec. Supply, Inc. v. Commissioner, 781
F.2d 724, 726 (9th Cir. 1986), affg. Lahr v. Commissioner, T.C.
Memo. 1984-472.
Petitioner bears the burden of proving the requisite intent.
Golanty v. Commissioner, 72 T.C. 411, 426 (1979), affd. without
published opinion 647 F.2d 170 (9th Cir. 1981); Johnson v.
Commissioner, 59 T.C. 791, 813 (1973), affd. 495 F.2d 1079 (6th
Cir. 1974). Whether a taxpayer is engaged in an activity with
the requisite profit objective is determined from all the facts
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