26 U.S.C. § 183 — Activities not engaged in for profit

Page 912 TITLE 26—INTERNAL REVENUE CODE [§ 182 apply to productions commencing after December 31, 2015. ‘‘(B) COMMENCEMENT.—For purposes of subpara- graph (A), the date on which a qualified live theat- rical production commences is the date of the first public performance of such production for a paying audience.’’ EFFECTIVE DATE OF 2014 AMENDMENT Pub. L. 113–295, div. A, title I, § 129(b), Dec. 19, 2014, 128 Stat. 4018, provided that: ‘‘The amendment made by this section [amending this section] shall apply to pro- ductions commencing after December 31, 2013.’’ EFFECTIVE DATE OF 2013 AMENDMENT Pub. L. 112–240, title III, § 317(b), Jan. 2, 2013, 126 Stat. 2331, provided that: ‘‘The amendment made by this sec- tion [amending this section] shall apply to productions commencing after December 31, 2011.’’ EFFECTIVE DATE OF 2010 AMENDMENT Pub. L. 111–312, title VII, § 744(b), Dec. 17, 2010, 124 Stat. 3319, provided that: ‘‘The amendment made by this section [amending this section] shall apply to pro- ductions commencing after December 31, 2009.’’ EFFECTIVE DATE OF 2008 AMENDMENT Pub. L. 110–343, div. C, title V, § 502(e), Oct. 3, 2008, 122 Stat. 3877, provided that: ‘‘(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section and section 199 of this title] shall apply to qualified film and television productions commencing after December 31, 2007. ‘‘(2) DEDUCTION.—The amendments made by sub- section (c) [amending section 199 of this title] shall apply to taxable years beginning after December 31, 2007.’’ EFFECTIVE DATE OF 2005 AMENDMENT Amendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title. EFFECTIVE DATE Pub. L. 108–357, title II, § 244(c), Oct. 22, 2004, 118 Stat. 1447, provided that: ‘‘The amendments made by this section [enacting this section] shall apply to qualified film and television productions (as defined in section 181(d)(1) of the Internal Revenue Code of 1986, as added by this section) commencing after the date of the en- actment of this Act [Oct. 22, 2004].’’ [§ 182. Repealed. Pub. L. 99–514, title IV, § 402(a), Oct. 22, 1986, 100 Stat. 2221] Section, added Pub. L. 87–834, § 21(a), Oct. 16, 1962, 76 Stat. 1063; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834, authorized de- duction of expenditures by farmers for clearing land. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Pub. L. 99–514, title IV, § 402(c), Oct. 22, 1986, 100 Stat. 2221, provided that: ‘‘The amendments made by this section [amending sections 263 and 1252 of this title and repealing this section] shall apply to amounts paid or incurred after December 31, 1985, in taxable years end- ing after such date.’’ § 183. Activities not engaged in for profit (a) General rule In the case of an activity engaged in by an in- dividual or an S corporation, if such activity is not engaged in for profit, no deduction attrib- utable to such activity shall be allowed under this chapter except as provided in this section. (b) Deductions allowable In the case of an activity not engaged in for profit to which subsection (a) applies, there shall be allowed— (1) the deductions which would be allowable under this chapter for the taxable year with- out regard to whether or not such activity is engaged in for profit, and (2) a deduction equal to the amount of the deductions which would be allowable under this chapter for the taxable year only if such activity were engaged in for profit, but only to the extent that the gross income derived from such activity for the taxable year exceeds the deductions allowable by reason of paragraph (1). (c) Activity not engaged in for profit defined For purposes of this section, the term ‘‘activ- ity not engaged in for profit’’ means any activ- ity other than one with respect to which deduc- tions are allowable for the taxable year under section 162 or under paragraph (1) or (2) of sec- tion 212. (d) Presumption If the gross income derived from an activity for 3 or more of the taxable years in the period of 5 consecutive taxable years which ends with the taxable year exceeds the deductions attrib- utable to such activity (determined without re- gard to whether or not such activity is engaged in for profit), then, unless the Secretary estab- lishes to the contrary, such activity shall be presumed for purposes of this chapter for such taxable year to be an activity engaged in for profit. In the case of an activity which consists in major part of the breeding, training, showing, or racing of horses, the preceding sentence shall be applied by substituting ‘‘2’’ for ‘‘3’’ and ‘‘7’’ for ‘‘5’’. (e) Special rule (1) In general A determination as to whether the presump- tion provided by subsection (d) applies with re- spect to any activity shall, if the taxpayer so elects, not be made before the close of the fourth taxable year (sixth taxable year, in the case of an activity described in the last sen- tence of such subsection) following the taxable year in which the taxpayer first engages in the activity. (2) Initial period If the taxpayer makes an election under paragraph (1), the presumption provided by subsection (d) shall apply to each taxable year in the 5-taxable year (or 7-taxable year) period beginning with the taxable year in which the taxpayer first engages in the activity, if the gross income derived from the activity for 3 (or 2 if applicable) or more of the taxable years in such period exceeds the deductions attrib- utable to the activity (determined without re- gard to whether or not the activity is engaged in for profit). (3) Election An election under paragraph (1) shall be made at such time and manner, and subject to Page 913 TITLE 26—INTERNAL REVENUE CODE [§ 185 such terms and conditions, as the Secretary may prescribe. (4) Time for assessing deficiency attributable to activity If a taxpayer makes an election under para- graph (1) with respect to an activity, the stat- utory period for the assessment of any defi- ciency attributable to such activity shall not expire before the expiration of 2 years after the date prescribed by law (determined with- out extensions) for filing the return of tax under chapter 1 for the last taxable year in the period of 5 taxable years (or 7 taxable years) to which the election relates. Such deficiency may be assessed notwithstanding the provi- sions of any law or rule of law which would otherwise prevent such an assessment. (Added Pub. L. 91–172, title II, § 213(a), Dec. 30, 1969, 83 Stat. 571; amended Pub. L. 92–178, title III, § 311(a), Dec. 10, 1971, 85 Stat. 525; Pub. L. 94–455, title II, § 214(a), title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1549, 1834; Pub. L. 97–354, § 5(a)(23), Oct. 19, 1982, 96 Stat. 1694; Pub. L. 99–514, title I, § 143(a), Oct. 22, 1986, 100 Stat. 2120; Pub. L. 100–647, title I, § 1001(h)(3), Nov. 10, 1988, 102 Stat. 3352; Pub. L. 113–295, div. A, title II, § 221(a)(36), Dec. 19, 2014, 128 Stat. 4042.) Editorial Notes AMENDMENTS 2014—Subsec. (e)(1). Pub. L. 113–295 struck out ‘‘For purposes of the preceding sentence, a taxpayer shall be treated as not having engaged in an activity during any taxable year beginning before January 1, 1970.’’ at end. 1988—Subsec. (e)(2). Pub. L. 100–647 substituted ‘‘ac- tivity for 3 (or 2 if applicable)’’ for ‘‘activity for 2’’. 1986—Subsec. (d). Pub. L. 99–514 substituted ‘‘3’’ for ‘‘2’’ before ‘‘or more’’ in first sentence and ‘‘ ‘2’ for ‘3’ and ‘7’ for ‘5’ ’’ for ‘‘the period of 7 consecutive taxable years for the period of 5 consecutive taxable years’’ in second sentence. 1982—Subsec. (a). Pub. L. 97–354 substituted ‘‘an S corporation’’ for ‘‘an electing small business corpora- tion (as defined in section 1371(b))’’. 1976—Subsecs. (d), (e)(3). Pub. L. 94–455, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Sec- retary’’. Subsec. (e)(4). Pub. L. 94–455, § 214(a), added par. (4). 1971—Subsec. (e). Pub. L. 92–178 added subsec. (e). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2014 AMENDMENT Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. L. 99–514, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1982 AMENDMENT Amendment by Pub. L. 97–354 applicable to taxable years beginning after Dec. 31, 1982, see section 6(a) of Pub. L. 97–354, set out as an Effective Date note under section 1361 of this title. EFFECTIVE DATE OF 1976 AMENDMENT Pub. L. 94–455, title II, § 214(c), Oct. 4, 1976, 90 Stat. 1549, provided that: ‘‘The amendments made by this section [amending this section and section 6212 of this title] shall apply with respect to taxable years begin- ning after December 31, 1969; except that such amend- ments shall not apply to any taxable year ending before the date of the enactment of this Act [Oct. 4, 1976] with respect to which the period for assessing a deficiency has expired before such date of enactment.’’ EFFECTIVE DATE OF 1971 AMENDMENT Pub. L. 92–178, title III, § 311(b), Dec. 10, 1971, 85 Stat. 526, provided that: ‘‘The amendment made by sub- section (a) [amending this section] shall apply to tax- able years beginning after December 31, 1969.’’ EFFECTIVE DATE Pub. L. 91–172, title II, § 213(d), Dec. 30, 1969, 83 Stat. 572, provided that: ‘‘The amendments made by this sec- tion [enacting this section, amending section 6504 of this title, and repealing section 270 of this title] shall apply to taxable years beginning after December 31, 1969.’’ [§ 184. Repealed. Pub. L. 101–508, title XI, § 11801(a)(12), Nov. 5, 1990, 104 Stat. 1388–520] Section, added Pub. L. 91–172, title VII, § 705(a), Dec. 30, 1969, 83 Stat. 670; amended Pub. L. 93–625, § 3(b), Jan. 3, 1975, 88 Stat. 2109; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834, related to am- ortization of certain railroad rolling stock. Statutory Notes and Related Subsidiaries SAVINGS PROVISION For provisions that nothing in repeal by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liabil- ity for tax for periods ending after Nov. 5, 1990, see sec- tion 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title. [§ 185. Repealed. Pub. L. 99–514, title II, § 242(a), Oct. 22, 1986, 100 Stat. 2181] Section, added Pub. L. 91–172, title VII, § 705(a), Dec. 30, 1969, 83 Stat. 672; amended Pub. L. 94–455, title XVII, § 1702, title XIX, § 1906(b) (13)(A), Oct. 4, 1976, 90 Stat. 1760, 1834; Pub. L. 95–473, § 2(a)(2)(B), Oct. 17, 1978, 92 Stat. 1464, related to amortization of railroad grading and tunnel bores. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Pub. L. 99–514, title II, § 242(c), Oct. 22, 1986, 100 Stat. 2181, provided that: ‘‘(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section [amending sec- tions 1082 and 1250 of this title and repealing this sec- tion] shall apply to that portion of the basis of any property which is attributable to expenditures paid or incurred after December 31, 1986. ‘‘(2) TRANSITIONAL RULE.—The amendments made by this section shall not apply to any expenditure in- curred— ‘‘(A) pursuant to a binding contract entered into before March 2, 1986, or ‘‘(B) with respect to any improvement commenced before March 2, 1986, but only if not less than the less-