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section 162,14 and fails to show error in respondent’s
determination that LFI was engaged in an activity not for profit,
then section 183 limits LFI’s deductions for expenses
attributable to the activity, as provided in section 183(b).
In order to establish that LFI engaged in an activity for
profit, petitioner must show he entertained an actual and honest
profit objective15 in engaging in the activity, even if that
objective was unreasonable or unrealistic. Burger v.
Commissioner, 809 F.2d 355, 358 (7th Cir. 1987), affg. T.C. Memo.
1985-523; Surloff v. Commissioner, 81 T.C. 210, 233 (1983);
Dreicer v. Commissioner, 78 T.C. 642, 644-645 (1982), affd.
without opinion 702 F.2d 1205 (D.C. Cir. 1983); sec. 1.183-2(a),
Income Tax Regs. Although section 183 applies at the corporate
level with respect to the activities of an S corporation, sec.
1.183-1(f), Income Tax Regs., we consider the intent of
petitioner, LFI’s sole shareholder, in deciding whether LFI had
the requisite profit objective, see Eppler v. Commissioner, 58
14Sec. 183(c) provides that a taxpayer is engaged in an
activity not for profit if the activity is one 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.” Petitioner argues for the first time on brief that LFI is
entitled to deduct its expenses under sec. 212 if we conclude
that LFI did not operate a trade or business for profit under
sec. 162. Respondent objects to this argument as untimely raised
and prejudicial. We agree with respondent and decline to
consider petitioner’s argument under sec. 212. Estate of
Gillespie v. Commissioner, 75 T.C. 374 (1980).
15Petitioner bears the burden of proving that he had the
requisite profit objective. Rule 142(a).
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