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section 212 [expenses incurred in the production of income].”
See also sec. 1.183-2(a), Income Tax Regs. Deductions are
allowable under these sections only if a taxpayer’s “primary
purpose and intention in engaging in the activity is to make a
profit.” Golanty v. Commissioner, 72 T.C. 411, 425 (1979), affd.
without published opinion 647 F.2d 170 (9th Cir. 1981). The
taxpayer’s expectation of a profit need not be reasonable, but
the taxpayer must possess an “‘actual and honest objective of
making a profit.’” Keanini v. Commissioner, 94 T.C. 41, 46
(1990)(quoting Dreicer v. Commissioner, 78 T.C. 642, 644-645
(1982), affd. without opinion 702 F.2d 1205 (D.C. Cir. 1983)).
Conversely, no deductions are allowable under section 162 or 212
for “activities which are carried on primarily as a sport, hobby,
or for recreation.” Sec. 1.183-2(a), Income Tax Regs.
The taxpayer bears the burden of establishing the requisite
profit objective. Rule 142(a); Keanini v. Commissioner, supra at
46; Golanty v. Commissioner, supra at 426. Whether the requisite
profit objective exists is determined by considering all the
surrounding facts and circumstances. Keanini v. Commissioner,
supra at 46; sec. 1.183-2(b), Income Tax Regs. Greater weight is
accorded to objective facts and circumstances than to the
taxpayer’s mere statement of intent. Sec. 1.183-2(a), Income Tax
Regs.
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