Joe Guadagno and Susan Beth Rishel Guadagno - Page 9

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               In the notice of deficiency, respondent disallowed the                 
          losses claimed on the Schedules C.  Other adjustments made in the           
          notice of deficiency either give effect to these disallowances or           
          are not in dispute.                                                         
               According to petitioners, their Amway activity, at                     
          all relevant times, was a trade or business.  Therefore,                    
          petitioners argue that the expenses they incurred in carrying               
          on this activity should be allowed as deductions.  See sec.                 
          162(a) (generally allowing deductions for the ordinary and                  
          necessary expenses paid or incurred during the taxable year in              
          carrying on any trade or business).  Respondent argues that                 
          petitioners were not carrying on a trade or business because they           
          lacked the requisite profit objective, and petitioners are not,             
          therefore, entitled to the deductions they claim, except to the             
          extent allowed by section 183.6  For the following reasons, we              

               6 In relevant part, sec. 183 provides:                                 
                    SEC. 183(a).  General Rule.–In the case of an                     
               activity engaged in by an individual or an S                           
               corporation, if such activity is not engaged in for                    
               profit, no deduction attributable to such activity                     
               shall be allowed under this chapter except as                          
               provided in this section.                                              
                    (b) Deductions Allowable.–In the case of an                       
               activity not engaged in for profit to which subsection                 
               (a) applies, there shall be allowed--                                  

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