Robert and Joyce Dirkse - Page 10

                                       - 10 -                                         
          an intent to make a profit.1  If petitioners did not have the               
          requisite profit motive, as respondent maintains, then all                  
          deductions exceeding the revenue attributable to those activities           
          would be disallowed pursuant to section 183(a).                             
               Respondent contends that petitioners lacked the requisite              
          intent to make a profit in carrying out their Schedule C                    
          activities.  Specifically, respondent asserts that petitioners (1)          
          did not conduct their Schedule C activities in a businesslike               
          manner, (2) never earned a profit from any of these activities and          
          are unlikely to do so in the near future, and (3) realized                  
          substantial tax savings by offsetting the income from their primary         
          occupations with their Schedule C losses.                                   
               On the other hand, petitioners maintain that they entered into         
          and carried out their Schedule C activities with an intent of               

               1    For purposes of applying sec. 183, we treat all three             
          of petitioners’ Schedule C activities as a single activity.  In             
          ascertaining what constitutes an activity or activities of a                
          taxpayer, we take into account the facts and circumstances of               
          each case.  See sec. 1.183-1(d), Income Tax Regs.  Generally, the           
          most significant factors in making this determination are the               
          degree of organizational and economic interrelationships of the             
          various undertakings and the business purpose which is (or might            
          be) served by carrying on the operations separately or in a trade           
          or business setting.  See id.                                               
               In the case at bar, petitioners contend that they entered              
          into each of their Schedule C activities with the intent of                 
          supplementing their retirement income.  All three activities were           
          operated with the same business purpose, and each shared the                
          resources and capital of the others; in sum, each Schedule C                
          activity was organizationally and economically dependent upon the           
          others.  On brief, petitioners treated all three of their                   
          Schedule C activities as one activity.                                      

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011