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request for an increase in the deficiencies in the event that we
sustain respondent in this matter.
Section 183(a) disallows deductions attributable to an
activity not engaged in for profit. Section 183(b) provides two
exceptions to this general rule. The first, provided by section
183(b)(1), permits deductions that otherwise would be allowable
without regard to whether the activity is engaged in for profit;
the second, provided by section 183(b)(2), permits deductions
that would be allowable only if the activity were engaged in for
profit to the extent that the gross income from the activity
exceeds the deductions allowable pursuant to section 183(b)(1).
Section 183(c) defines an “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.” In general, the
Commissioner’s determination set forth in the notice of
deficiency is presumed correct. Rule 142(a)(1); Welch v.
Helvering, 290 U.S. 111, 115 (1933). In certain circumstances
3(...continued)
overruled respondent’s objection and admitted Exhibit 14-J into
evidence together with the stipulation. The Court instructed
respondent that it would not bar him from maintaining a different
position with respect to the taxable years at issue in the
present case. The Court informed the parties that it would weigh
this piece of evidence in the light of the entire record in the
case. We recognize the implication of this documentation is that
respondent allowed depreciation on assets held for use in
petitioners’ horse-boarding activities in taxable year 1996.
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Last modified: November 10, 2007