George R. and Barbara H. Burrus - Page 14

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          section 183.  Respondent further determined that petitioners were           
          liable for an addition to tax for untimely filing their 1990                
          return, and that they were liable for negligence penalties for              
          all the years in issue.                                                     
                                       OPINION                                        
          I.  Section 183                                                             
               We must decide whether petitioners’ undertakings reported on           
          Schedules F during the years in issue constituted an activity not           
          engaged in for profit within the meaning of section 183, as                 
          determined by respondent.  As a general rule, individuals are               
          allowed to deduct expenses attributable to an “activity not                 
          engaged in for profit" only to the extent permitted by section              
          183(b).  Sec. 183(a) and (b).  Petitioners contend that the                 
          farming activity they reported on Schedules F, consisting                   
          primarily of the cattle breeding and sales conducted as Maple               
          Row, was conducted with a profit motive and is not subject to               
          section 183.                                                                
               A.  Single Activity Issue                                              
               Determining whether an activity falls within the                       
          restrictions of section 183 requires an initial determination of            
          the activity’s scope.  Respondent has issued regulations on this            
          point, the validity of which petitioners have not challenged.               
          See sec. 1.183-1(d), Income Tax Regs.  A taxpayer may be engaged            





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