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allowable without regard to whether the activity is engaged in
for profit, and section 183(b)(2) permits deductions which would
be allowable if such activity were engaged in for profit, but
only to the extent the gross income derived from the activity
exceeds the deductions allowable by reason of 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 order for a deduction to be allowed under section 162 or
section 212(1) or (2), the taxpayer must establish that he
“engaged in the activity with ‘the predominant, primary or
principal objective’ of realizing an economic profit independent
of tax savings.” Giles v. Commissioner, T.C. Memo. 2006-15
(quoting Wolf v. Commissioner, 4 F.3d 709, 713 (9th Cir. 1993),
affg. T.C. Memo. 1991-212); see Patin v. Commissioner, 88 T.C.
1086 (1987), affd. sub nom. Skeen v. Commissioner, 864 F.2d 93,
94 (9th Cir. 1989).
Although a reasonable expectation of profit is not required,
the facts and circumstances must indicate that the taxpayer
entered into the activity, or continued the activity, with the
actual and honest objective of making a profit. Keanini v.
Commissioner, 94 T.C. 41, 46 (1990); Dreicer v. Commissioner, 78
T.C. 642, 645 (1982), affd. without published opinion 702 F.2d
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