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“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.”
An activity is engaged in for profit if the taxpayer
entertained an actual and honest, even though unreasonable or
unrealistic, profit objective in engaging in the activity.
Hulter v. Commissioner, 91 T.C. 371, 393 (1988); Ronnen v.
Commissioner, 90 T.C. 74, 91 (1988) (taxpayer’s objective of
making a profit must be bona fide); sec. 1.183-2(a), Income Tax
Regs.
The determination of whether an activity is engaged in for
profit is to be made by reference to objective standards, taking
into account all the facts and circumstances of each case.
Dreicer v. Commissioner, 78 T.C. 642, 644-645 (1982), affd.
without opinion 702 F.2d 1205 (D.C. Cir. 1983); Jasionowski v.
Commissioner, 66 T.C. 312, 319 (1976); sec. 1.183-2(b), Income
Tax Regs. Greater weight is given to the objective facts than to
the taxpayer’s own statements of intent. Sec. 1.183-2(a), Income
Tax Regs.
Section 1.183-2(b), Income Tax Regs., sets forth a
nonexclusive list of factors that should normally be taken into
account in determining whether the requisite profit objective has
been shown. The factors are: (1) Manner in which the taxpayer
carries on the activity; (2) the expertise of the taxpayer or his
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