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I. Whether the Equipment Leasing Activity Was Engaged In for
Profit
Generally, individuals are allowed to fully deduct losses
attributable to an activity engaged in for profit. See secs.
183(a), 162(a), and 212. A taxpayer must engage in an activity
with an actual and honest, even though unreasonable or
unrealistic, profit motive to deduct depreciation expenses. See
Antonides v. Commissioner, 893 F.2d 656, 659 (4th Cir. 1990),
affg. 91 T.C. 686 (1988); Keanini v. Commissioner, 94 T.C. 41, 45
(1990); Hulter v. Commissioner, 91 T.C. 371, 392-393 (1988);
Fuchs v. Commissioner, 83 T.C. 79, 97-98 (1984); Dreicer v.
Commissioner, 78 T.C. 642, 645 (1982), affd. without opinion 702
F.2d 1205 (D.C. Cir. 1983); sec. 1.183-2(a), Income Tax Regs.;
see also sec. 162(a). Although a reasonable expectation of
profit is not required, the taxpayer’s profit objective must be
bona fide. Hulter v. Commissioner, supra; Beck v. Commissioner,
85 T.C. 557, 569 (1985); sec. 1.183-2(b), Income Tax Regs. This
is a factual question, and to resolve it, we generally look to
nine nonexclusive factors.7 Sec. 1.183-2(b), Income Tax Regs.;
6(...continued)
of proving otherwise. Rule 142(a); Welch v. Helvering, 290 U.S.
111, 115 (1933). Deductions are generally a matter of
legislative grace, and the taxpayer bears the burden to prove he
or she is entitled to the claimed deductions. INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934).
7The factors in sec. 1.183-2(b), Income Tax Regs., are:
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