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Discussion
Petitioners claim they are entitled to a deduction for the
net loss reported on the Schedule C under the authority of either
section 162 or section 174. In general, a taxpayer is entitled
to deductions for “all the ordinary and necessary expenses paid
or incurred during the taxable year in carrying on any trade or
business”. Sec. 162(a). Furthermore, a taxpayer is generally
entitled to deductions for research and experimental expenditures
paid or incurred during the taxable year “in connection with” the
taxpayer’s trade or business. Sec. 174(a). A taxpayer who
claims a deduction under either section must be engaged in a
trade or business. See Commissioner v. Groetzinger, 480 U.S. 23,
35 (1987); Green v. Commissioner, 83 T.C. 667, 686-687 (1984).
Respondent argues that petitioner was not engaged in a trade or
business during 1995. For the following reasons, we agree with
respondent.
Although the term “trade or business” is not specifically
defined in the Internal Revenue Code, “to be engaged in a trade
or business, the taxpayer must be involved in the activity with
continuity and regularity and the taxpayer’s primary purpose for
engaging in the activity must be for income or profit.”
Commissioner v. Groetzinger, supra at 35. A sporadic activity
does not qualify as a trade or business. See id.; see also Green
v. Commissioner, supra at 686-687. We assume, without finding,
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