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activities had changed such that she was now primarily using the
Internet to conduct her activities.
OPINION
A. Section 183 Generally
Section 183 restricts taxpayers from deducting losses from
an activity that is not “engaged in for profit”. Sec. 183(a).
An activity is engaged in for profit if the taxpayer entertained
an actual and honest profit objective in engaging in the
activity. Surloff v. Commissioner, 81 T.C. 210, 233 (1983);
Dreicer v. Commissioner, 78 T.C. 642, 645, (1982), affd. without
opinion 702 F.2d 1205 (D.C. Cir. 1983); sec. 1.183-2(a), Income
Tax Regs. The taxpayer’s expectation of profit must be in good
faith. Allen v. Commissioner, 72 T.C. 28, 33 (1979) (citing
section 1.183-2(a), Income Tax Regs.).
In deciding whether Mrs. Smith operated her direct marketing
activities for profit, we consider the following nine factors:
(1) The manner in which she carried on the activity; (2) her
expertise or that of her advisers; (3) the time and effort she
expended in carrying on the activity; (4) the expectation that
the assets she used in the activity may appreciate in value; (5)
her success in carrying on other similar or dissimilar
activities; (6) her history of income or loss with respect to the
activity; (7) the amount of occasional profits, if any, which she
earned; (8) her financial status; and (9) whether elements of
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