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at age 60,19 he retired. One of the reasons Mr. Rinehart started
the horse breeding activity was to have a source of income during
his retirement, which he anticipated to be in 2000, or in case he
lost his job before he retired.
OPINION
Section 183(a) provides generally that, if an activity is
not engaged in for profit, no deduction attributable to such
activity shall be allowed except as provided in section 183(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.”
The U.S. Court of Appeals for the Fifth Circuit, to which an
appeal in this case would lie, has held that for a deduction to
be allowed under section 162 or section 212(1) or (2), a taxpayer
must establish that he engaged in the activity with the primary
purpose and intent of realizing an economic profit independent of
tax savings. Westbrook v. Commissioner, 68 F.3d 868, 875 (5th
Cir. 1995), affg. T.C. Memo. 1993-634.
The expectation of profit need not have been reasonable;
however, the taxpayer must have entered into the activity, or
continued it, with the objective of making a profit. Hulter v.
19 Age 60 was the mandatory retirement age.
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