                       T.C. Memo. 1997-436



                     UNITED STATES TAX COURT



               ANTHONY J. MCCARTHY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16929-96.               Filed September 24, 1997.



     Toni Robinson, Raj J. Mahale, Susan L. Moon, Erin M.

 O'Hanlon, for petitioner.

     Robert E. Marum, for respondent.


                       MEMORANDUM OPINION


     DINAN, Special Trial Judge:   This case was heard pursuant

to section 7443A(b)(3) and Rules 180, 181, and 182.1


     1
          Unless otherwise indicated, all section references are
to the Internal Revenue Code in effect for the taxable year in
issue. All Rule references are to the Tax Court Rules of
Practice and Procedure.
                                   - 2 -

       Respondent determined a deficiency in petitioner's Federal

income tax for 1993 in the amount of $3,696.

       After a concession by respondent,2 the issue for decision is

whether petitioner is entitled to a business loss deduction for

amounts paid in connection with his son's motocross racing

activity.

       Some of the facts have been stipulated and are so found.

The stipulations of fact and attached exhibits are incorporated

herein by this reference.      Petitioner resided in New Britain,

Connecticut, on the date the petition was filed in this case.

       Petitioner was employed as a construction worker during

1993, specializing in concrete work.       He worked approximately 40

hours per week.      Petitioner has three children.   The activity in

issue is related to his oldest son, Benjamin.

       As early as 1989, at the age of 9, Benjamin showed an

interest in riding motorcycles.      Petitioner believed Benjamin had

a special talent for racing far greater than other children his

age.       At the end of 1992, when Benjamin was 12 years old, father

and son decided that they would devote a substantial amount of

their energies to Benjamin's racing activity.




       2
          Respondent concedes that petitioner has substantiated
the amounts of his claimed Schedule C expenses. Respondent has
only disallowed the portion of the expenses that produced the
loss in issue. Therefore, our decision is limited to such
portion.
                               - 3 -

     Petitioner conducted research on sponsorship opportunities

and racing strategies.   He decided which races Benjamin would

enter and what size motorcycle Benjamin would ride.     He performed

any necessary maintenance or repair work on the motorcycles.     In

addition to his involvement in Benjamin's racing, petitioner's

experience with motocross racing includes 2 years of his own

amateur racing in 1976 and 1977.

     Petitioner purchased a vehicle that he described as his

"race truck".   The vehicle has sleeping quarters for four

individuals and is equipped with a refrigerator, microwave,

toilet, shower with running hot water, and television.     The

vehicle also has a rear work area where petitioner prepares

Benjamin's motorcycles for the races.

     Benjamin entered numerous races and placed well in most of

them.   At the time of trial, Benjamin had not moved from the

amateur to the professional level.     As an amateur racer, he is

not eligible to receive cash prizes for racing within the United

States.   During 1993, Benjamin won noncash vouchers worth $2,525

that were redeemable for racing merchandise, parts, and

equipment.   He turned over $2,250 of the vouchers to petitioner,

who used them to pay for racing expenses.

     Benjamin reported gross income in the amount of $2,525 for

the vouchers on his 1993 Federal income tax return.     He claimed a

deduction in the amount of $2,250 for management fees.     The
                               - 4 -

management fees consisted solely of the vouchers that Benjamin

gave to petitioner.

     Petitioner reported gross receipts in the amount of $2,250

on his 1993 Schedule C as management fees, representing the

vouchers he received from Benjamin.    He claimed Schedule C

expenses related to Benjamin's racing activity in the amount of

$15,467, which produced a loss of $13,217.    In the statutory

notice of deficiency, respondent disallowed the claimed loss on

the ground that the expenses paid or incurred in connection with

the racing activity were for an activity not entered into for

profit under section 183.

     Respondent's determinations in the statutory notice of

deficiency are presumed to be correct, and petitioner bears the

burden of proving otherwise.   Rule 142(a); Welch v. Helvering,

290 U.S. 111, 115 (1933).   Moreover, deductions are strictly a

matter of legislative grace, and petitioner bears the burden of

proving his entitlement to any deductions claimed.    Rule 142(a);

INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New

Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).

     Petitioner claims that during 1993 he was engaged in the

business of managing his 13-year-old son's motocross racing

career.3   He and Benjamin each testified that they had an

unwritten understanding that petitioner would take care of the


     3
           Benjamin turned 13 years old on April 14, 1993.
                               - 5 -

business and planning aspects of the racing while Benjamin would

concentrate on training and improving his racing skills.

     Section 162(a) provides for the deduction of all ordinary

and necessary expenses paid or incurred during the taxable year

in carrying on any trade or business.   Whether an activity

constitutes the taxpayer's trade or business within the meaning

of section 162(a) generally depends upon whether the taxpayer's

primary purpose for engaging in the activity is for income or

profit, and whether the activity is conducted with continuity and

regularity.   Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987).

     Both parties frame the issue in this case as being whether

petitioner's claimed business loss for his management activity is

limited by section 183.   Section 183(a) disallows any deductions

attributable to an "activity * * * not engaged in for profit",

except as provided in section 183(b).   The parties argue that the

nine factors contained in section 1.183-2(b), Income Tax Regs.,

should guide our decision.

     During 1993, petitioner supported Benjamin's participation

in motocross racing.   We find that petitioner has extended his

time and effort well beyond the degree that parents ordinarily

devote to their children's "extracurricular" interests.    In any

event, simply because he chose to spend an extraordinary amount

of money on behalf of his son and devoted most of his spare time

to Benjamin's motocross racing does not establish that

petitioner's loss was incurred in a profit seeking activity.    We
                                - 6 -

agree with petitioner's contention that Benjamin's motocross

racing activity is different from his other children's

extracurricular activities.   However, we believe the difference

between Benjamin's and his siblings' extracurricular activities

is not in the nature of the activities (i.e., business versus

personal), but in the amount of time and money spent by

petitioner on those activities.   We conclude that petitioner had

personal rather than business motives for incurring the loss in

question on behalf of Benjamin.

     Furthermore, the record amply demonstrates that Benjamin has

enjoyed a great deal of success at the amateur level of his

motocross competition and may very well compete at the

professional level at some time in the future.   However, we find

that petitioner did not engage in his management activity with

the requisite profit objective necessary to support deductions

under section 162(a) for the taxable year in issue.   There was no

possibility that petitioner could have realized a profit from his

management activity during 1993 because Benjamin was an amateur

motocross racer during that year and was not eligible to win any

cash prizes.   In fact, Benjamin was not eligible to compete as a

professional for cash prizes until he turned 16 years old on

April 14, 1996.   At the age of 17, he had still not become a

professional motocross racer.

     If and when Benjamin begins to compete professionally for

cash prizes, petitioner's management activity may be considered
                                 - 7 -

an activity with the opportunity to produce a profit.       During the

year in issue, however, petitioner failed to show a profit

objective for conducting the activity in which he incurred the

loss on behalf of his son.

     We hold that petitioner is not entitled to the claimed

business loss.

     To reflect the foregoing,

                                              Decision will be entered

                                         for respondent.
