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to respondent under certain circumstances. Petitioners have
neither alleged that section 7491(a) applies nor established
their compliance with the requirements of section 7491(a)(2)(A)
and (B) to substantiate items, maintain records, and cooperate
fully with respondent’s reasonable requests. Petitioners
therefore bear the burden of proof.
Section 162 provides that a taxpayer who is carrying on a
“trade or business” may deduct ordinary and necessary expenses
incurred in connection with the operation of the business. To be
engaged in a trade or business within the meaning of section 162,
“the taxpayer’s primary purpose for engaging in the activity must
be for income or profit.” Commissioner v. Groetzinger, 480 U.S.
23, 35 (1987). Profit means economic profit, independent of tax
savings. Surloff v. Commissioner, 81 T.C. 210, 233 (1983). If
the taxpayer is not engaged in a trade or business under section
162, the taxpayer generally may deduct the expenses related to an
activity “not engaged in for profit” only to the extent of the
gross income derived from the activity for the taxable year.
Sec. 183(a) and (b)(2); Elliott v. Commissioner, 90 T.C. at 973.
We consider all of the facts and circumstances in deciding
whether a taxpayer entered into the activity for a profit,
placing greater weight upon objective facts than the taxpayer’s
statements of intent. Dreicer v. Commissioner, 78 T.C. 642, 645
(1982), affd. without opinion 702 F.2d 1205 (D.C. Cir. 1983).
The following nine nonexclusive factors are relevant in making
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