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activity that a taxpayer carries on primarily as a hobby or for
recreation. Sec. 1.183-2(a) Income Tax Regs. For a taxpayer’s
expenses of an activity to be deductible under section 162 or
section 212, and not subject to the limitations of section 183,
the activity must be carried on with an actual and honest profit
objective. E.g., Dreicer v. Commissioner, 78 T.C. 642, 645
(1982), affd. without opinion 702 F.2d 1205 (D.C. Cir. 1983).
The regulations under section 183 provide a nonexclusive
list of nine factors to consider in determining whether an
activity is carried on for profit, as follows: (1) The manner in
which the activity is carried on; (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 other similar or
dissimilar activity; (6) the taxpayer’s history of income or
losses with respect to the activity; (7) the amount of occasional
profits, if any, which are earned; (8) the financial status of
the taxpayer; and (9) whether elements of personal pleasure or
recreation are involved. See sec. 1.183-2(b), Income Tax Regs.
Neither a single factor, nor the existence of even a
majority of the factors, is controlling, but rather an evaluation
of all the facts and circumstances is necessary. Golanty v.
Commissioner, 72 T.C. 411, 426-427 (1979), affd. without opinion
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Last modified: November 10, 2007