Ruth N. Nelson - Page 16




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          under Rule 155 will be required to remedy the erroneous                     
          adjustment made by respondent.7                                             
               The principal issue is whether petitioner's Baton Rouge                
          Volleyball Club activity was an activity not engaged in for                 
          profit under section 183(a) for 1992 and 1993.  Section 183(a)              
          provides generally that, if an activity is not engaged in for               
          profit, no deduction attributable to such activity shall be                 
          allowed.  Section 183(b)(1), however, provides that deductions              
          that are allowable without regard to whether the activity is                
          engaged in for profit shall be allowed.  Section 183(b)(2)                  
          further provides that deductions that would be allowable only if            
          the activity were engaged in for profit shall be allowed, "but              
          only to the extent that the gross income derived from such                  
          activity for the taxable year exceeds the deductions allowable by           
          reason of" section 183(b)(1).                                               
               Section 183(c) defines an activity not engaged in for profit           
          as "any activity other than one with respect to which deductions            
          are allowable for the taxable year under section 162 or under               
          paragraph (1) or (2) of section 212."  The Court's inquiry is               
          directed to whether the taxpayer engaged in the activity with the           

               7    In this instance, petitioner's income determined in the           
          notice of deficiency should be reduced by $1,956; i.e., $1,227              
          for the erroneous increase of income in the notice of deficiency            
          and $729 for the amount reported by petitioner on her 1993                  
          return.                                                                     






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