- 5 -
$3,054 but, pursuant to sec. 274(n)(1), claimed a deduction
for only $1,527 of such expenses.
3 The “Other expenses” consisted of business publication
expenses of $979 and automobile expenses of $2,785. The
automobile expenses were based on 8,843 miles of travel for
business purposes multiplied by the standard mileage rate of
$0.315 per mile.
4 Petitioners mistakenly did not make an entry on the return
line for net loss. Because petitioners did not report any
expenses under sec. 280A for business use at their home,
their net loss is equal to their tentative loss of $12,732.
On their 1997 Federal income tax return, petitioners also
claimed a deduction of $880 for self-employed health insurance
expenses. In the notice of deficiency, respondent disallowed all
of the expenses that petitioners reported in connection with
their Schedule C activities on the grounds that they had not
engaged in these activities for profit. Respondent also
determined that petitioners were not entitled to deduct any
amount paid for the costs of self-employed health insurance.
Discussion
I. Activity Not Engaged in for Profit
Section 183(a) provides that if an activity engaged in by an
individual is not engaged in for profit, no deduction
attributable to such activity shall be allowed, except as
provided in section 183(b). In the case of an activity not
engaged in for profit, section 183(b)(1) allows deductions for
expenses that would be allowable without regard to whether the
activity 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
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