Larry G. and Mary L. Bangs - Page 13

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          gross income from the activity exceeds the deductions allowable             
          under section 183(b)(1).                                                    
               We follow the Court of Appeals opinion squarely in point               
          when appeal from our decision would lie to that court absent                
          stipulation by the parties to the contrary.  Golsen v.                      
          Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir.             
          1971).  Taxpayers residing in the Ninth Circuit, such as                    
          petitioners, must prove they conducted their activities with the            
          primary, predominant, or principal purpose of realizing an                  
          economic profit independent of tax savings.  See Wolf v.                    
          Commissioner, 4 F.3d 709, 713 (9th Cir. 1993), affg T.C. Memo.              
          1991-212; Polakof v. Commissioner, 820 F.2d 321, 323 (9th Cir.              
          1987), affg. T.C. Memo. 1985-197; Indep. Elec. Supply, Inc. v.              
          Commissioner, 781 F.2d 724, 726 (9th Cir. 1986), affg. Lahr v.              
          Commissioner, T.C. Memo. 1984-472.                                          
               Whether a taxpayer has the primary, predominant, or                    
          principal purpose of realizing an economic profit independent of            
          tax savings is determined on the basis of all surrounding facts             
          and circumstances.  Polakof v. Commissioner, supra at 324; Indep.           
          Elec. Supply, Inc. v. Commissioner, supra at 727; Dreicer v.                
          Commissioner, 78 T.C. 642, 645 (1982), affd. without published              
          opinion 702 F.2d 1205 (D.C. Cir. 1983); sec. 1.183-2(b), Income             
          Tax Regs.  While a taxpayer’s expectation of profit need not be             
          reasonable, there must be a good faith objective of making a                
          profit.  Allen v. Commissioner, 72 T.C. 28, 33 (1979); sec.                 
          1.183-2(a), Income Tax Regs.                                                





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