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“not engaged in for profit” except to the extent of gross income
generated by the activity. Section 183(c) defines an activity
“not engaged in for profit” as any activity other than one for
which deductions are “allowable * * * under section 162 or under
paragraph (1) or (2) of section 212.” Essentially the test for
determining whether an activity is engaged in for profit is
whether the taxpayer engages in the activity with the primary
objective of making a profit. See Antonides v. Commissioner, 893
F.2d 656, 659 (4th Cir. 1990), affg. 91 T.C. 686 (1988).
Although the expectation need not be reasonable, the expectation
must be bona fide. See Hulter v. Commissioner, 91 T.C. 371, 393
(1988). Furthermore, in resolving the question, greater weight
is given to the objective facts than to the taxpayer’s statement
of intentions. See Thomas v. Commissioner, 84 T.C. 1244, 1269
(1985), affd. 792 F.2d 1256 (4th Cir. 1986).
Section 1.183-2(b), Income Tax Regs., contains a
nonexclusive list of factors to be used in determining whether an
activity is engaged in for profit. These factors are: (1) The
manner in which the taxpayer carries on the activity; (2) the
expertise of the taxpayer or his advisers; (3) the time and
effort expended by the taxpayer in carrying on the activity; (4)
the expectation that assets used in the activity may appreciate
in value; (5) the success of the taxpayer in carrying on similar
or dissimilar activities; (6) the history of income or losses
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Last modified: May 25, 2011