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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).
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