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B. Application of Section 183
1. Background: Governing Principles
Generally, under section 183(a) and (b), individuals are not
allowed deductions attributable to an activity “not engaged in
for profit” except to the extent of gross income generated by the
activity (in this case, zero). Section 183(c) defines an
activity “not engaged in for profit” as “any activity other than
one with respect to which deductions are allowable * * * under
section 162 or under paragraph (1) or (2) of section 212.”
Expenditures incurred in an activity are deductible under
sections 162 and 212(1) or (2) if, among other things, the
taxpayer establishes that she engaged in that activity with the
actual and honest, objective of making an economic profit
independent of tax savings, even if that objective was not
reasonable. Hulter v. Commissioner, 91 T.C. 371, 393 (1988);
Sec. 1.183-2(a), Income Tax Regs.
In determining whether the requisite profit motive exists,
we consider all the pertinent facts and circumstances. Sec.
1.183-2(b), Income Tax Regs. The following factors bearing upon
7(...continued)
with respect to a factual issue necessarily means that she cannot
sustain her resulting burden of proof with respect to that issue.
Therefore, our discussions of those issues (both here, dealing
with petitioner’s Schedule C deductions and, subsequently,
dealing with her other deductions and her claim of head-of-
household status) may be viewed as setting forth the basis for
our conclusions that petitioner has failed to (1) introduce
“credible evidence” and (2) carry her burden of proof.
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