- 14 -
Cir. 2005), affg. T.C. Memo. 2003-212; Estate of Stone v.
Commissioner, T.C. Memo. 2003-309).
II. Application of Section 183
Before we address whether petitioner had the requisite
profit motive based on the facts and circumstances, we first must
address the threshold issue of whether petitioner’s equestrian
and design undertakings constitute a single activity for purposes
of deciding whether petitioner had the requisite profit motive
under section 183. We believe in this case that the resolution
of this issue skews all of the remaining issues in favor of the
party who prevails. Petitioner’s arguments for profit motive all
revolve around the assumption that the undertakings constitute
one activity, while respondent’s arguments isolate the equestrian
undertaking and its losses to argue that petitioner did not have
the requisite profit motive.
Whether Petitioner’s Undertakings May Be Treated as One
Activity
Multiple undertakings of a taxpayer may be treated as one
activity if the undertakings are sufficiently interconnected.
Sec. 1.183-1(d)(1), Income Tax Regs. The most important factors
in making this determination are the degree of organizational and
economic interrelationship of the undertakings, the business
purpose served by carrying on the undertakings separately or
together, and the similarity of the undertakings. Id. The
Commissioner generally accepts the taxpayer’s characterization of
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
Last modified: November 10, 2007