## Facts

- Maurice C. Dreicer, a wealthy taxpayer, pursued extensive travel and asserted he was engaged in profit-seeking writing and lecturing activities, including work connected to a travel book.
- Dreicer claimed substantial deductions and losses on his federal income tax returns attributable to these writing and lecturing activities.
- The Commissioner determined the activities were “not engaged in for profit” under I.R.C. § 183 and disallowed loss deductions beyond what § 183(b) permits.
- The Tax Court characterized the relevant undertakings as writing and lecturing (not a broader “multimedia” profession) and found Dreicer’s conduct and financial results inconsistent with a profit-oriented venture.
- On appeal, the D.C. Circuit accepted the Tax Court’s factual findings but concluded the Tax Court used an incorrect legal standard for evaluating profit motive under § 183.

## Issues

1. Under I.R.C. § 183, must a taxpayer show a bona fide or reasonable expectation of profit, or is it sufficient that profit was the taxpayer’s actual and honest objective even if success was unlikely?
2. If the correct standard is an actual and honest profit objective, did Dreicer’s writing and lecturing activities satisfy § 183 so that deductions under §§ 162, 212, and 165 were not limited?

## Decision

- The D.C. Circuit reversed and remanded, holding the Tax Court applied an incorrect profit-motive test under § 183.
- The D.C. Circuit held that an activity is engaged in for profit when profit is actually and honestly the taxpayer’s objective, even if the likelihood of achieving profit is low.
- On remand, the Tax Court applied the “actual and honest objective” standard and again held Dreicer lacked the required profit objective.
- The Tax Court therefore sustained the Commissioner’s limitation of Dreicer’s deductions under § 183.

## Legal Principles

- I.R.C. § 183 limits deductions for an activity “not engaged in for profit,” qualifying claimed deductions otherwise asserted under I.R.C. §§ 162 (trade or business expenses), 212 (income-production expenses), and 165 (losses in profit-seeking activities).
- The § 183 profit-motive inquiry focuses on whether profit was the taxpayer’s actual and honest objective; § 183 does not require a reasonable expectation of profit.
- Profit motive is determined from all facts and circumstances, commonly evaluated through the nonexclusive factors in Treas. Reg. § 1.183-2 (including manner of conducting the activity, expertise, time and effort, history of income or losses, financial status, and personal pleasure elements).
- A sustained pattern of losses, substantial independent wealth, and significant personal or recreational aspects may support a finding that the activity was not engaged in for profit.

## Conclusion

The D.C. Circuit held that § 183 turns on a taxpayer’s actual and honest profit objective rather than a reasonable expectation of profit and remanded for application of that standard; applying it, the Tax Court found Dreicer’s writing and lecturing lacked a genuine profit objective, so § 183 limited his deductions.


Dreicer v. Commissioner, 665 F.2d 1292 (D.C. Cir. 1981)