Melvin W. Garrett - Page 8




                                        - 7 -                                         
          profit” as any activity other than one for which deductions are             
          “allowable * * * under section 162 or under paragraph (1) or (2)            
          of section 212.”  Essentially, the test for determining whether             
          an activity is engaged in for profit is whether the taxpayer                
          engages in the activity with the primary objective of making a              
          profit.  Antonides v. Commissioner, 893 F.2d 656, 659 (4th Cir.             
          1990), affg. 91 T.C. 686 (1988).  Although the expectation need             
          not be reasonable, the expectation must be bona fide.  See Hulter           
          v. Commissioner, 91 T.C. 371, 393 (1988).  Furthermore, in                  
          resolving the question, greater weight is given to the objective            
          facts than to the taxpayer’s statement of intentions.  See Thomas           
          v. Commissioner, 84 T.C. 1244, 1269 (1985), affd. 792 F.2d 1256             
          (4th Cir. 1986).                                                            
               Section 1.183-2(b), Income Tax Regs., contains a                       
          nonexclusive list of factors to be used in determining whether an           
          activity is engaged in for profit.  These factors are:  (1) The             
          manner in which the taxpayer carries on the activity; (2) the               
          expertise of the taxpayer or his advisers; (3) the time and                 
          effort expended by the taxpayer in carrying on the activity; (4)            
          the expectation that assets used in the activity may appreciate             
          in value; (5) the success of the taxpayer in carrying on similar            
          or dissimilar activities; (6) the history of income or losses               
          with respect to the activity; (7) the amount of occasional                  
          profits, if any; (8) the financial status of the taxpayer; and              






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  Next

Last modified: May 25, 2011