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authorizes a deduction for expenses that would be allowable if
the activity were engaged in for profit, but only to the extent
that gross income attributable to the activity exceeds the
deductions permitted by section 183(b)(1). Section 183(c)
defines “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.”
Section 162 authorizes a deduction for the expenses of
carrying on an activity that constitutes a trade or business of
the taxpayer. See sec. 162(a); sec. 1.183-2(a), Income Tax Regs.
To be engaged in a trade or business with respect to which
deductions are allowable under section 162, “the taxpayer must be
involved in the activity with continuity and regularity”, and
“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); see also Warden v. Commissioner, T.C. Memo. 1995-
176, affd. without published opinion 111 F.3d 139 (9th Cir.
1997).
Absent a stipulation to the contrary, see sec. 7482(b)(2),
this case is appealable to the Court of Appeals for the Tenth
Circuit, which has applied the dominant or primary objective
standard to test whether an alleged business activity is
conducted for profit. Hildebrand v. Commissioner, 28 F.3d 1024,
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