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tangible personal property that is subject to the allowance for
depreciation. Sec. 48(a)(1). Depreciation is allowable on
property subject to wear and tear or obsolescence and used in a
trade or business or for the production of income. Sec. 167(a).
The credit is limited to a percentage of a taxpayer's "qualified
investment" in such property. Qualified investment is a
percentage of basis, and basis is generally cost. Secs. 46(c),
1011.
As the foregoing discussion indicates, common to the tax
benefits claimed--whether deductions or credits--is the
requirement that the activity at issue be a trade or business or
a transaction otherwise entered into for profit. If this
requirement is not met, section 183 limits deductions to the
amount of income from the activity, and no investment tax credits
are allowed. Soriano v. Commissioner, 90 T.C. 44, 52-53 (1988).
Section 183(c) defines an activity which is "not engaged in
for profit" as "any activity other than one with respect to which
deductions are allowable for the taxable year under section 162
or under paragraph (1) or (2) of section 212." Deductions under
section 162 or 212(1) or (2) require the "actual and honest
objective of making a profit." Dreicer v. Commissioner, 78 T.C.
642, 645 (1982), affd. without opinion 702 F.2d 1205 (D.C. Cir.
1983). Profit means economic profit independent of tax savings.
Antonides v. Commissioner, 91 T.C. 686, 694 (1988), affd. 893
F.2d 656 (4th Cir. 1990). Although the expectation of making a
profit need not be reasonable, the facts and circumstances must
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