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a recording studio/producer on his Schedule C, Profit or Loss
From Business, for 1996. Petitioner received no income from his
recording activity in 1996 and thus reported a net business loss
of $20,462 for that year. As of the time of trial of this case
in September 2006, petitioner had not received any income from
his recording activity.
OPINION
Section 162 permits a taxpayer to deduct ordinary and
necessary expenses incurred during the taxable year in carrying
on any trade or business. Section 183 generally limits the
amount of deductions for an activity not entered into for profit
to the amount of the activity’s income. See sec. 183(b). The
notice of deficiency determined that the costs of petitioner’s
recording activities were startup expenses not currently
deductible. The parties agree, however, that the controlling
issue is whether petitioner was engaged in a trade or business
with regard to his recording activity during 1996. We decide
that issue on the preponderance of the evidence, regardless of
the burden of proof.
In order to establish that he was engaged in a trade or
business, the taxpayer must be continuously and regularly
involved in the activity for the primary purpose of making a
profit. Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987); see
also sec. 1.183-2(a), Income Tax Regs. Whether the taxpayer
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