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allowable for the taxable year under section 162 or under
paragraph (1) or (2) of section 212.”14 Pursuant to the
jurisprudence of the Court of Appeals for the Ninth Circuit, the
court to which an appeal of this case most likely lies, an
activity is engaged in for profit if the taxpayer’s “predominant,
primary or principal objective” in engaging in the activity was
to profit. Wolf v. Commissioner, 4 F.3d 709, 713 (9th Cir.
1993), affg. T.C. Memo. 1991-212. In this context, the term
“profit” denotes economic profit, independent of tax savings.
Id.; Antonides v. Commissioner, 91 T.C. 686, 693-694 (1988),
affd. 893 F.2d 656 (4th Cir. 1990).
Petitioner, as noted above, bears the burden of proving that
she entered into and during each year in issue remained in the
horse activity with a predominant, primary, or principal
14 Sec. 162 deals with “trade or business expenses” which
are “ordinary and necessary expenses paid or incurred * * * in
carrying on any trade or business”. Sec. 212(1) and (2) deals
with expenses for the “production or collection of income” or
“management, conservation, or maintenance of property held for
the production of income”. Deductions are generally allowable
under sec. 162 for the expenses of carrying on an activity which
constitutes a trade or business of the taxpayer. See sec. 162;
sec. 1.183-2(a), Income Tax Regs. To be engaged in such a trade
or business, “the taxpayer must be involved in the activity with
continuity and regularity”, and “the taxpayer’s primary purpose
for engaging in the activity must be income or profit”.
Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987); see also
Warden v. Commissioner, T.C. Memo. 1995-176, affd. without
published opinion 111 F.3d 139 (9th Cir. 1997).
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