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Petitioner contends that he maintained books and records of
his activity; however, those records were kept at Toyota West,
his employer, and when his job there was terminated, the records
were confiscated and never returned. Those records, however,
would not have included any bank records because petitioner
maintained no bank accounts. He dealt only in cash. He testified
that he never had a bank account. All of his salary checks were
cashed, and all of his bills were paid in cash, including those
of the horse activity.
Section 183(a) provides generally that, if an activity is
not engaged in for profit, no deduction attributable to such
activity shall be allowed. Section 183(c) defines an activity
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."
This case is appealable to the Ninth Circuit Court of Appeals.
Within the Ninth Circuit, the standard for determining whether an
activity is engaged in for profit under section 183 is whether
the primary purpose of the activity was for profit. See Warden
v. Commissioner, T.C. Memo. 1995-176, affd. without published
opinion 111 F.3d 139 (9th Cir. 1997). While a reasonable
expectation of profit is not required, the taxpayer's profit
objective must be bona fide. See Hulter v. Commissioner, 91 T.C.
371 (1988). Whether a taxpayer's primary purpose in engaging in
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