Ralph E. Wesinger, Jr. and Catherine R. Wesinger - Page 12




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          income from that particular activity, the practical effect of               
          section 183 is to preclude a taxpayer from deducting losses                 
          incurred in such ventures.                                                  
               An “activity not engaged in for profit” 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 expenses] or under paragraph (1) or (2) of           
          section 212 [expenses incurred in the production of income].”               
          See also sec. 1.183-2(a), Income Tax Regs.  Deductions are                  
          allowable under these sections only if a taxpayer’s “primary                
          purpose and intention in engaging in the activity is to make a              
          profit.”  Golanty v. Commissioner, 72 T.C. 411, 425 (1979), affd.           
          without published opinion 647 F.2d 170 (9th Cir. 1981).  The                
          taxpayer’s expectation of a profit need not be reasonable, but he           
          or she must possess an “actual and honest objective of making a             
          profit.”  Keanini v. Commissioner, 94 T.C. 41, 46 (1990) (quoting           
          Dreicer v. Commissioner, 78 T.C. 642, 644-645 (1982), affd.                 
          without opinion 702 F.2d 1205 (D.C. Cir. 1983)).                            
               Conversely, no deductions are allowable under section 162 or           
          212 for “activities which are carried on primarily as a sport,              
          hobby, or for recreation.”  Sec. 1.183-2(a), Income Tax Regs.  In           
          determining the category into which a particular venture falls,             
          the taxpayer bears the burden of establishing the requisite                 
          profit objective.  Keanini v. Commissioner, supra at 46; Golanty            






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