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devoid of any evidence that petitioner took steps to operate RBS
in a businesslike manner.
For the foregoing reasons, we find that petitioner’s
basketball school activity was not engaged in for profit within
the meaning of section 183. Therefore, respondent’s
determination that petitioner may not deduct losses from that
activity is sustained.4
Deductibility of Expenses
Since we have sustained respondent’s determination that
petitioner did not engage in his basketball school activity for
profit within the meaning of section 183, we now turn our
analysis as to what deductions, if any, petitioner may be
permitted to take in accordance with section 183(b)(1) and (2).
Section 183(b)(1) allows deductions which are otherwise allowable
without regard to whether the activity is engaged in for profit;
e.g., State and local taxes and interest. Section 183(b)(2)
allows deductions that would be allowable if the activity were
4 Irrespective of our decision to sustain respondent’s
determination with respect to petitioner’s basketball school
activity, we disagree with respondent’s recharacterization of the
income as listed on petitioner’s Schedules C for RBS for each of
the taxable years in issue on the grounds that the income was
received from petitioner’s employer as reimbursement for employee
business expenses. Upon our review of the record, including the
Forms W-2, Wage and Tax Statement, from petitioner’s employer for
the years in issue, we fail to find that petitioner received any
income as reimbursement for business expenses. Accordingly, a
decision to be entered under Rule 155 will reflect the foregoing.
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Last modified: November 10, 2007