- 11 - (2) certain additional expenses to the extent of the gross income derived from the activity, less those deductions of the first type. A taxpayer must have an actual and honest profit objective in order for an activity to be one which is for profit. Surloff v. Commissioner, 81 T.C. 210, 233 (1983); Dreicer v. Commissioner, 78 T.C. 642, 644 (1982), affd. without published opinion 702 F.2d 1205 (D.C. Cir. 1983); sec. 1.183-2(a), Income Tax Regs. This determination is made at the corporate level with respect to the activities of an S corporation. Baldwin v. Commissioner, T.C. Memo. 2002-162; sec. 1.183-1(f), Income Tax Regs. However, we look to the intent of an S corporation’s sole shareholder in deciding whether the corporation had the requisite profit objective. Baldwin v. Commissioner, supra. In determining whether the requisite intention to make a profit exists, greater weight is given to objective facts than to the taxpayer’s self-serving characterization of his intent. Id.; Dreicer v. Commissioner, supra at 645; sec. 1.183-2(a), Income Tax Regs. The regulations set forth a nonexclusive list of factors to be considered in determining whether the taxpayer has the requisite profit objective: (1) The manner in which the taxpayer carries on the activity; (2) the expertise of the taxpayer or his advisers; (3) the time and effort expended by the taxpayer in carrying on the activity; (4) the expectation thatPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011