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In his position with Grogan’s, petitioner typically works 40
to 45 hours per week, Monday through Friday, as director of sales
operations. He reported gross income of $59,696.08 on his 2001
joint Federal income tax return from this employment. Pamela A.
Hill was employed by the Fayette County Clerk’s Office in 2001,
and she had a salary of $31,060.59 as deputy county clerk. On
Schedule C of petitioners’ income tax return for 2001, they
reported gross receipts of $892, expenses of $11,303, and a net
loss of $10,411 from the tournament bass fishing activity. In
the notice of deficiency, respondent determined that the bass
fishing activity was not an activity engaged in for profit within
the meaning of section 183. The $892 reported as gross receipts
from the fishing activity was reclassified as “Other Income”, and
the entirety of the claimed Schedule C expenses of $11,303 was
disallowed.4 Thus, the net adjustment was an increase in
petitioners’ taxable income of $11,303.
The issue for decision is whether petitioner’s bass fishing
activity was an activity not engaged in for profit under section
183(a). Section 183(a) generally disallows any deductions
4According to the notice of deficiency:
The expenses incurred in connection with fishing are
allowable in the amount of $892.00 in 2001 as miscellaneous
itemized deductions. Further, miscellaneous itemized
deductions are only deductible to the extent that they
exceed two percent of your adjusted gross income. Due to
the adjustments herein which increase adjusted gross income,
miscellaneous itemized deductions are not allowable * * *.
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