Unpublished Disposition, 930 F.2d 26 (9th Cir. 1991)Annotate this Case
Harris CASHMAN, Petitioner-Appellant,v.COMMISSIONER INTERNAL REVENUE SERVICE, Respondent-Appellee.
United States Court of Appeals, Ninth Circuit.
Submitted March 14, 1991.* Decided April 3, 1991.
Before D.W. NELSON, KOZINSKI and THOMAS G. NELSON, Circuit Judges.
In order to deduct expenses of an activity under section 162 or 212 of the Internal Revenue Code, appellant was required to show that he engaged in the activity with an actual and honest objective of making a profit. See 26 U.S.C. §§ 162 & 212; Beck v. Commissioner, 85 T.C. 557, 569 (1985). After weighing the evidence, the Tax Court concluded that "petitioner has failed to carry his burden of proof to show that he purchased 'The Year of December' with an actual and honest objective of making a profit." E.R. 4, at 10. This finding is not clearly erroneous.
Equally meritless is appellant's claim that the Tax Court erred by applying section 183 to an activity not conducted as a personal hobby. The legislative history cited by appellant cannot overcome the plain language of section 183, which disallows a deduction for any activity "not engaged in for profit." 26 U.S.C. § 183(a); see 26 U.S.C. § 183(c) ("For purposes of this section, the term 'activity not engaged in for profit' means any activity other than one with respect to which deductions are allowable ... under section 162 or ... section 212." (emphasis added)); see, e.g., Beck 85 T.C. 557 (purchase of publishing rights for tax purposes not activity engaged in for profit); Dean v. Commissioner, 83 T.C. 56 (1984) (same); Sutton v. Commissioner, 84 T.C. 210 (1985) (ownership of refrigerated highway freight cars not activity engaged in for profit), aff'd 788 F.2d 695 (11th Cir. 1986).
Appellant also misconstrues section 183(d) when he argues that receiving some income from the publishing venture establishes a presumption of a profit objective. Rather, section 183(d) creates a presumption that an activity is engaged in for profit where, during a specified period, gross income "exceeds the deductions attributable to such activity." 26 U.S.C. § 183(d). Appellant has not produced any evidence that the proceeds he received from the venture during 1982, 1983 or 1985 constituted income exceeding expenses attributable to the publishing activity.
Appellant's argument that denying him any deduction under section 183 causes him to forfeit his out of pocket expenses fails under similar reasoning. Section 183(b) (2) allows a deduction only to the extent that appellant's gross income derived from the venture exceeds expenses attributable to that venture, regardless of whether the activity was engaged in for profit. 26 U.S.C. § 183(b) (2).