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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.”
For a deduction to be allowed under section 162 or section
212(1) or (2), a taxpayer must establish that he or she engaged
in an activity with an actual and honest objective of making an
economic profit independent of tax savings. See Antonides v.
Commissioner, 91 T.C. 686, 693-694 (1988), affd. 893 F.2d 656
(4th Cir. 1990); Dreicer v. Commissioner, 78 T.C. 642, 644-645
(1982), affd. without opinion 702 F.2d 1205 (D.C. Cir. 1983).
The expectation of profit need not have been reasonable; however,
the taxpayer must have entered into the activity, or continued
it, with the objective of making a profit. See Hulter v.
Commissioner, 91 T.C. 371, 393 (1988); sec. 1.183-2(a), Income
Tax Regs.
Whether the requisite profit objective exists is determined
by looking at all the surrounding facts and circumstances. See
Keanini v. Commissioner, 94 T.C. 41, 46 (1990); sec. 1.183-2(b),
Income Tax Regs. Greater weight is given to objective facts than
to a taxpayer’s mere after-the-fact statement of intent. See
Westbrook v. Commissioner, 68 F.3d 868, 875-876 (5th Cir. 1995),
affg. T.C. Memo. 1993-634; sec. 1.183-2(a), Income Tax Regs. The
taxpayer bears the burden of proving that he engaged in the
activity with the intent to make a profit. See Rule 142(a).
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