Lucian T. Baldwin, III - Page 26

                                       - 26 -                                         
          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).                                   

Page:  Previous  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  31  32  33  34  35  Next

Last modified: May 25, 2011