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making a profit. Petitioners assert that they operated their
Schedule C activities in a businesslike manner. Petitioners
maintain that because the apiary and tree-farming activities were
inherently high risk businesses that often require a lengthy
startup period, their history of losses relating thereto was not
uncommon. Accordingly, petitioners maintain that they were willing
to incur substantial startup costs with the expectation that
eventually their Schedule C activities would provide them with
supplemental retirement income.
For the reasons set forth below, we agree with respondent and
conclude for each of the years at issue, petitioners’ Schedule C
activities were not engaged in for profit.2
We begin our analysis with the applicable statutory
provisions. Pursuant to section 183, deductions with respect to an
activity “not engaged in for profit” generally are limited to the
amount of gross income derived from such activity. 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
2 Because we find that petitioners’ Schedule C activities
were not engaged in or carried on for profit, we need not decide
respondent’s alternative position that petitioners’ Schedule C
losses were passive activity losses subject to the limitations
imposed under sec. 469.
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