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A. Mortgage Services
A taxpayer’s expertise, research, and study of an activity,
as well as his or her consultation with experts, may be
indicative of a profit objective. Sec. 1.183-2(b)(2), Income Tax
Regs. Despite taking a mortgage broker class, petitioner
demonstrated confusion surrounding the basic difference between
being a mortgage broker and a mortgage lender. For example, she
testified at trial that the reason she had not done any business
as a mortgage broker was that she was concerned about her
obligations should the borrower go into default. Petitioner did
make some personal loans to friends and relatives which were
reported on her Schedule B, Interest and Ordinary Dividends, but
these were not made as part of the activities at issue here. She
also provided no indication that she was a licensed or registered
mortgage broker in the State of Colorado, or that she had
consulted others who were either successful mortgage brokers or
mortgage lenders for assistance and advice.
Even if we were persuaded, arguendo, that petitioner
intended to engage in this activity with the necessary profit
objective, any expenses attributable to it would not be
deductible pursuant to section 162.
Section 162(a) permits a deduction for the ordinary and
necessary expenses of carrying on a trade or business. In order
for a taxpayer to deduct expenses under section 162(a), the
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Last modified: March 27, 2008