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knowledge, respondent must show that petitioner had “actual
knowledge of the factual circumstances which made the item
unallowable as a deduction.” King v. Commissioner, 116 T.C. at
204. In the instant case, this requires that respondent prove
that petitioner knew or believed that Mr. Rowe was not engaged in
the farming activity for profit. See King v. Commissioner, supra
at 205.
Section 183 provides that expenses incurred in conducting an
activity which is “not engaged in for profit” are not deductible,
except as otherwise provided in section 183(b). 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.” This case is appealable to the Court of Appeals
for the Eleventh Circuit. In determining whether an activity is
engaged in for profit, the Court of Appeals for the Eleventh
Circuit has stated that the relevant inquiry is whether the
taxpayer’s actual and honest objective in engaging in the
activity is to make a profit. Osteen v. Commissioner, 62 F.3d
23(...continued)
substantiate the claimed losses. On brief, respondent limits his
sec. 6015(c) argument to the contention that petitioner had
actual knowledge that the horse and fish activities were not
engaged in for profit. While respondent asserts that petitioners
have failed to prove that the losses were actually incurred,
respondent has not proven that the losses were not incurred and
makes no allegation that petitioner had actual knowledge that
such losses were not incurred.
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