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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 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 the burden of proof shifts to respondent.
Sec. 7491(a)(1). Petitioners do not contend that section 7491 is
applicable in this case, nor did they establish that the burden
of proof should shift to respondent.
Petitioners bear the burden of establishing that their
photographic activity was engaged in for profit during the
taxable years at issue. Rule 142(a). In satisfying this burden,
taxpayers must show that they had an actual and honest objective
of making a profit from the activity. Dreicer v. Commissioner,
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Last modified: November 10, 2007