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“the taxpayer’s primary purpose for engaging in the activity must
be income or profit”. Commissioner v. Groetzinger, 480 U.S. 23,
35 (1987); see also Warden v. Commissioner, T.C. Memo. 1995-176,
affd. without published opinion 111 F.3d 139 (9th Cir. 1997).
This case is appealable to the Court of Appeals for the
Ninth Circuit, which applies a primary purpose standard to test
whether an alleged business activity has the requisite profit
motive under sections 162 and 183. That standard is “whether the
activity was entered into with the dominant hope and intent of
realizing a profit.” Vorsheck v. Commissioner, 933 F.2d 757, 758
(9th Cir. 1991), affg. in part and revg. in part T.C. Memo. 1994-
281; see also Wolf v. Commissioner, 4 F.3d 709, 713 (9th Cir.
1993) (“Profit must be the predominant, primary or principal
objective), affg. T.C. Memo. 1991-212; Machado v. Commissioner,
T.C. Memo. 1995-526, affd. without published opinion 111 F.3d 139
(9th Cir. 1997); Warden v. Commissioner, supra. We apply that
standard here.
Whether the requisite profit objective exists is to be
resolved on the basis of all the surrounding facts and
circumstances of the case. See Golanty v. Commissioner, 72 T.C.
411, 426 (1979), affd. without published opinion 647 F.2d 170
(9th Cir. 1981); sec. 1.183-2(b), Income Tax Regs. The
taxpayer’s expectation of profit need not be reasonable, but it
must be bona fide. See Golanty v. Commissioner, supra at 426.
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