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production or collection of income” or “for the management,
conservation, or maintenance of property held for the production
of income”.
For a deduction to be allowed under section 162 or section
212(1) or (2), a taxpayer must establish that he engaged in the
activity with the primary purpose and dominant intent of
realizing a profit. See Commissioner v. Groetzinger, 480 U.S.
23, 35 (1987);7 Hayden v. Commissioner, 889 F.2d 1548, 1552 (6th
Cir. 1989), affg. T.C. Memo. 1988-310; Godfrey v. Commissioner,
335 F.2d 82, 84 (6th Cir. 1964), affg. T.C. Memo. 1963-1; see
also Warden v. Commissioner, T.C. Memo. 1995-176, affd. without
published opinion 111 F.3d 139 (9th Cir. 1997). In determining
whether an activity is engaged in for profit, greater weight is
given to objective facts than to the taxpayer’s mere statement of
his intent. See sec. 1.183-2(a), Income Tax Regs.
Section 183(d) provides a rebuttable presumption that an
activity will be an activity engaged in for profit if the gross
income from the activity exceeds the deductions attributable to
the activity for 3 or more of the taxable years in a 5-year
period. In the case of an activity which consists in major part
of the breeding, training, showing, or racing of horses, “2” is
7“We accept the fact that to be engaged in a trade or
business, the taxpayer must be involved in the activity with
continuity and regularity and that 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).
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