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the opportunity to develop evidence regarding, among other
things, the appropriate allocation of expenses if we were to find
two or more separate activities--an issue as to which the record
currently is silent.
In any event, even if we were to consider respondent’s new
“separate activity” argument, we would be unpersuaded of its
merits. Section 1.183-1(d)(1), Income Tax Regs. (to which
respondent has not alluded), provides as follows:
In order to determine whether, and to what extent,
section 183 and the regulations thereunder apply, the
activity or activities of the taxpayer must be
ascertained. For instance, where the taxpayer is
engaged in several undertakings, each of these may be a
separate activity, or several undertakings may
constitute one activity. In ascertaining the activity
or activities of the taxpayer, all the facts and
circumstances of the case must be taken into account.
Generally, the most significant facts and circumstances
in making this determination are the degree of
organizational and economic interrelationship of
various undertakings, the business purpose which is (or
might be) served by carrying on the various
undertakings separately or together in a trade or
business or in an investment setting, and the
similarity of various undertakings. Generally, the
Commissioner will accept the characterization by the
taxpayer of several undertakings either as a single
activity or as separate activities. The taxpayer’s
characterization will not be accepted, however, when it
appears that his characterization is artificial and
cannot be reasonably supported under the facts and
circumstances of the case. * * * [Emphasis added.]
We do not believe that petitioner’s characterization of his
Schedule C activities as one activity is “artificial and cannot
be reasonably supported under the facts and circumstances of the
case.” Id. The facts indicate substantial linkage between
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