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OPINION
Respondent determined that petitioners’ horse breeding was
not an activity engaged in for profit within the meaning of
section 183. Section 183(a) provides that, if an activity is not
engaged in for profit, no deductions attributable to the activity
shall be allowed except as provided in section 183(b). Section
183(b)(1) allows only those deductions that are not dependent
upon a profit motive, such as taxes. Section 183(b)(2) allows
the deductions that would be allowable if the activity was
engaged in for profit, but only to the extent that gross income
attributable to the activity exceeds the deductions permitted by
section 183(b)(1). An “activity not engaged in for profit” is
defined in section 183(c) as “any activity 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.”
Petitioners bear the burden of proving that the requisite
profit motive exists. Rule 142(a); Golanty v. Commissioner, 72
T.C. 411, 426 (1979), affd. without published opinion 647 F.2d
170 (9th Cir. 1981). Section 7491(a), which is effective with
respect to court proceedings arising in connection with
examinations by the Commissioner commencing after July 22, 1998,
the date of its enactment by section 3001(a) of the Internal
Revenue Service Restructuring and Reform Act of 1998, Pub. L.
105-206, 112 Stat. 726, does not apply to place the burden of
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