- 12 - or section 212(1) or (2) in the Court of Appeals for the Fourth Circuit is whether the taxpayer engaged in the activity primarily for the purpose of making a profit. See Hendricks v. Commissioner, 32 F.3d 94, 97 n.6 (4th Cir. 1994), affg. T.C. Memo. 1993-396. While a reasonable expectation of profit is not required, a taxpayer’s profit objective must be bona fide. See Hulter v. Commissioner, 91 T.C. 371 (1988). Whether a taxpayer is primarily engaged in the activity for profit is a question of fact to be resolved from all relevant facts and circumstances. See id. at 393; Golanty v. Commissioner, 72 T.C. 411, 426 (1979), affd. without published opinion 647 F.2d 170 (9th Cir. 1981). In resolving this factual question, greater weight is given to objective facts than to the taxpayer’s after-the-fact statements of intent. See Siegel v. Commissioner, 78 T.C. 659, 699 (1982); sec. 1.183-2(a), Income Tax Regs. Thus, several factors are taken into consideration in determining whether an activity is engaged in primarily for profit under section 183. Generally, these factors, set out in section 1.183-2(b), Income Tax Regs., include: (1) The manner in which the activity is conducted, (2) the taxpayer’s expertise, (3) the time and effort expended in the activity, (4) an expectation that the assets used in the activity may appreciate in value, (5) the success of the taxpayer in other similar or dissimilar activities, (6) the history of income or losses of thePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011