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practice. As a result, if the claimed expenses relating to the
Feadship are allowed in full, petitioner’s losses relating to the
Feadship will result in Federal income tax savings to petitioner
of $245,790 for 1995, $364,462 for 1996, and $989,450 for 1997.
On audit for each of the years in issue, respondent
disallowed the claimed expenses and losses relating to
petitioner’s restoration, charter, and sale of the Feadship.
OPINION
Generally, expenses attributable to an activity not engaged
in for profit are not allowable as ordinary and necessary
business expense deductions except to the extent of income from
the activity. Sec. 183(a) and (b). An “activity not engaged in
for profit” is defined in section 183(c) 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.”
For the expenses to be deductible under sections 162 and
212, so that the limitation of section 183 will not apply, a
taxpayer must engage in or carry on an activity to which the
expenses relate with an actual and honest objective of making a
profit. Keanini v. Commissioner, 94 T.C. 41, 45 (1990) (citing
Golanty v. Commissioner, 72 T.C. 411, 425 (1979), affd. without
published opinion 647 F.2d 170 (9th Cir. 1981)); Dreicer v.
Commissioner, 78 T.C. 642, 645 (1982), affd. without opinion 702
F.2d 1205 (D.C. Cir. 1983). Petitioners bear the burden of
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