- 12 -
conclude that neither section 7491(a) nor (c) applies here.
Section 7491(a) places the burden of proof upon the Commissioner
in specified circumstances. Section 7491(c) places the burden of
production upon the Commissioner as to an individual’s liability
for a penalty or an addition to tax.
1. Fishing Activity
Section 183, which applies to activities engaged in by
individuals or S corporations, generally limits the deductions
for an “activity not engaged in for profit” to the amount of
income received from the activity. Sec. 183(a) and (b). Section
183(c) defines an “activity not engaged in for profit” 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.”5 An activity is engaged in
for profit if the taxpayer entertained an actual and honest, even
though unreasonable or unrealistic, profit objective in engaging
in the activity. Osteen v. Commissioner, 62 F.3d 356, 358 (11th
Cir. 1995), affg. on this issue T.C. Memo. 1993-519; Dreicer v.
Commissioner, 78 T.C. 642, 645 (1982), affd. without opinion
702 F.2d 1205 (D.C. Cir. 1983); sec. 1.183-2(a), Income Tax Regs.
5 Sec. 162 deals with “trade or business expenses”, which
are limited to “ordinary and necessary expenses paid or incurred
* * * in carrying on any trade or business”. Sec. 212(1) and(2)
deals with expenses for the “production or collection of income”
or “management, conservation, or maintenance of property held for
the production of income”.
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011