James R. and Janet M. Landrum - Page 8




                                        - 7 -                                         
          incurred in connection with the Amway activity were therefore               
          deductible only to the extent of income earned from the activity.           
               Section 183(a) provides that if an activity engaged in by an           
          individual is not engaged in for profit, no deduction                       
          attributable to such activity shall be allowed, except as                   
          provided in section 183(b).2  An “activity not engaged in for               
          profit” means any activity other than one for which deductions              
          are allowable under section 162 or under paragraph (1) or (2) of            
          section 212.  Sec. 183(c).  Section 162 allows a deduction for              
          all the ordinary and necessary expenses paid or incurred during             
          the taxable year in carrying on a business.  Section 212 allows a           
          deduction for all the ordinary and necessary expenses paid or               
          incurred during the taxable year for the production or collection           
          of income, or for the management, conservation, or maintenance of           
          property held for the production of income.  The profit standards           
          applicable to section 212 are the same as those used in section             
          162.  Antonides v. Commissioner, 893 F.2d 656, 659 (4th Cir.                
          1990), affg. 91 T.C. 686 (1988).                                            



          2    In the case of an activity not engaged in for profit, sec.             
          183(b)(1) allows a deduction for expenses that are otherwise                
          deductible without regard to whether the activity is engaged in             
          for profit.  Sec. 183(b)(2) allows a deduction for expenses that            
          would be deductible only if the activity were engaged in for                
          profit, but only to the extent that the total gross income                  
          derived from the activity exceeds the deductions allowed by sec.            
          183(b)(1).                                                                  






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011