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is engaged in for profit. Section 183(b)(2) allows a deduction
for expenses that would be deductible only if the activity were
engaged in for profit, but only to the extent that the total
gross income derived from the activity exceeds the deductions
allowed by section 183(b)(1).
As noted earlier, petitioner reported gross sales of gold of
$770, $1,540, and $585, respectively, for each of the years at
issue. Under section 183(b), petitioner is entitled to deduct
expenses up to the amount of his gross sales, even though the
activity was not engaged in for profit. In the notice of
deficiency, respondent disallowed all the expenses claimed on
Schedule C of petitioner’s return for each of the years in
question for lack of substantiation. Petitioner was not allowed
deductions equal to the gross receipts he reported for each of
the years in question.
Although, as noted earlier, petitioner’s books and records
did not satisfy the recordkeeping requirements of the Code, the
Court is nevertheless satisfied, on this record, that petitioner
incurred expenses equal to the gross sales he reported for the
years in question. On the basis of Cohan v. Commissioner, 39
F.2d 540, 543-544 (2d Cir. 1930), petitioner is allowed
deductions of $770, $1,540, and $585 with respect to his gold
mining activity for 1994, 1995, and 1996, respectively.
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