Otis W. Jordan and Alma F. Jordan - Page 6

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          In general, section 162(a)1 allows a deduction for all ordinary             
          and necessary expenses paid or incurred during the taxable year             
          in carrying on a trade or business.  In order for an activity to            
          be considered a taxpayer's trade or business for purposes of                
          section 162, the activity must be conducted “with continuity and            
          regularity” and “the taxpayer's primary purpose for engaging in             
          the activity must be for income or profit”.  Commissioner v.                
          Groetzinger, 480 U.S. 23, 35 (1987).                                        
               Respondent argues that the deductions here in dispute are              
          not allowable under section 162(a).  According to respondent,               
          petitioners’ horse racing activity did not constitute a trade or            
          business during the year in issue because petitioners did not               
          engage in that activity for profit.                                         
               The test of whether a taxpayer conducted an activity for               
          profit is whether he or she entered into, or continued, the                 
          activity with the actual or honest objective of making a profit.            
          See Keanini v. Commissioner, 94 T.C. 41, 46 (1990); Dreicer v.              
          Commissioner, 78 T.C. 642, 644-645 (1982), affd. without                    
          published opinion 702 F.2d 1205 (D.C. Cir. 1983); sec. 1.183-               
          2(a), Income Tax Regs.  The taxpayer's profit objective                     
          must be bona fide, taking into account all of the facts and                 
          circumstances.  See Keanini v. Commissioner, supra at 46; Dreicer           

               1Unless otherwise indicated, section references are to the             
          Internal Revenue Code in effect for 1994.  Rule references are to           
          the Tax Court Rules of Practice and Procedure.                              

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