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loss of $20,348 in 1999, gross receipts of $225 and a net loss of
$22,197 in 2000, and gross receipts of $25 and a net loss of
$18,826 in 2001.
Petitioners deducted expenses relating to the drag racing
activity on their tax returns for the years at issue. Respondent
disallowed the deduction of petitioner’s losses in a notice of
deficiency dated February 5, 2004, determining that petitioner
did not engage in the drag racing activity for profit under
section 183. Petitioners timely filed a petition with this Court
seeking redetermination of the disallowed deductions and
asserting that petitioner entered the drag racing activity with
the intent of making a profit, and that, when he was not able to
make a profit as anticipated, he liquidated the activity.
Discussion
A. Whether Petitioner Operated the Drag Racing Activity for
Profit During the Years at Issue
The sole issue for decision is whether petitioner operated
the drag racing activity for profit during the years at issue
within the meaning of section 183. Section 183(a) provides
generally that if an individual engages in an activity and “if
such activity is not engaged in for profit, no deduction
attributable to such activity shall be allowed under this chapter
except as provided in this section.” Deductions that would be
allowable without regard to whether the activity is engaged in
for profit shall be allowed under section 183(b)(1), and
deductions that would be allowable only if the activity is
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