- 6 -
were liable for an accuracy-related penalty of $42 under section
6662(a) for 2000 based on petitioners’ omission of a State income
tax refund from their return. In response to the notice of
deficiency, petitioners filed their petition with this Court on
December 24, 2003.
OPINION
A. Petitioners’ Special Education Activity
The first issue is whether petitioners’ special education
activity was an activity engaged in for profit during the years
in issue. Section 183(a) provides 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.”5
Section 183(c) defines an “activity not engaged in for profit” as
“any activity other than one with respect to which deductions are
allowable for the taxable year under section 162 or under
paragraph (1) or (2) of section 212.”
Section 162 allows the taxpayer to deduct expenses of
carrying on a taxpayer’s trade or business if those expenses are
5 Sec. 183(b)(1) provides that deductions which would be
allowable without regard to whether such activity is engaged in
for profit shall be allowed. Sec. 183(b)(2) provides that
deductions which would be allowable only if such activity is
engaged in for profit shall be allowed “but only to the extent
that the gross income derived from such activity for the taxable
year exceeds the deductions allowable by reason of paragraph
(1).” Neither subsection is at issue in the instant case.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011