- 6 -
Discussion
Section 183 precludes deductions for activities not engaged
in for profit except to the extent of the gross income derived
from those activities. Sec. 183(a) and (b)(2). Thus, deductions
are not allowable for activities that a taxpayer carries on
primarily for sport, as a hobby, or for recreation. Sec. 1.183-
2(a), Income Tax Regs. For a taxpayer’s expenses in an activity
to be deductible under section 162, entitled “Trade or Business
Expenses”, or section 212, entitled “Expenses for Production of
Income”, and not subject to the limitations of section 183, a
taxpayer must show that the taxpayer engaged in the activity with
an actual and honest objective of making a profit. Hulter v.
Commissioner, 91 T.C. 371, 392 (1988); Dreicer v. Commissioner, 78
T.C. 642, 645 (1982), affd. without opinion 702 F.2d 1205 (D.C.
Cir. 1983); Hastings v. Commissioner, T.C. Memo. 2002-310.
Whether a taxpayer has an actual and honest profit objective is a
question of fact to be answered from all the relevant facts and
circumstances. Hulter v. Commissioner, supra at 393; Hastings v.
Commissioner, supra; sec. 1.183-2(a), Income Tax Regs. Greater
weight is given to objective facts than to a taxpayer’s mere
statement of intent. Dreicer v. Commissioner, supra at 645; sec.
1.183-2(a), Income Tax Regs.
The regulations set forth a nonexhaustive list of factors
that may be considered in deciding whether a taxpayer had a profit
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: November 10, 2007