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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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