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income.” A review of the record proves this to be an accurate
assessment. In addition, during 1996 and 1997, petitioner owned
no beef cattle, reported no income from beef cattle, yet claimed
losses of $1,384 and $1,065 from beef cattle on his Schedules F.
For 1997, petitioner claimed $824 additional losses on a second
Schedule C from an alleged wood working activity. Petitioner’s
use of various schedules on his returns shows that he had learned
to use them as a tax cash cow.
Section 183(a) disallows any deduction attributable to
activities not engaged in for profit except as provided under
section 183(b). Section 183(b)(1) allows those deductions which
otherwise are allowable regardless of profit objective. Section
183(b)(2) allows those deductions which would be allowable if the
activity were engaged in for profit, but only to the extent that
gross income attributable to the activity exceeds the deductions
permitted by section 183(b)(1). Section 183(c) defines “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 basic standard for determining whether an expense is
deductible under section 162 and 212 (and thus not subject to the
limitations of section 183) is the following: a taxpayer must
show that he or she engaged in or carried on the activity with an
actual and honest objective of making a profit. Ronnen v.
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Last modified: May 25, 2011