DEDUCTIONS ATTRIBUTABLE TO ACTIVITIES NOT ENGAGED IN FOR PROFIT.

SEC. 213. DEDUCTIONS ATTRIBUTABLE TO ACTIVITIES NOT ENGAGED IN FOR PROFIT. (a) General Rule.—Part VI of subchapter B of chapter 1 (relating to itemized deductions for individuals and corporations) amended by adding at the end thereof the following new section: “SEC. 183. ACTIVITIES NOT ENGAGED IN FOR PROFIT. “(a) General Rule.—In the case of an activity engaged in by an individual or an electing small business corporation (as defined in section 1371(b)), if such activity is not engaged in for profit, no deduction attributable 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— 83 Stat. 572 “(1) the deductions which would be allowable under this chapter for the taxable year without 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 ‘activity not engaged in for profit’ means any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) of section 212. “(d) Presumption.—If the gross income derived from an activity for 2 or more of the taxable years in the period of 5 consecutive taxable years which ends with the taxable year exceeds the deductions attributable to such activity (determined without regard to whether or not such activity is engaged in for profit), then, unless the Secretary or his delegate establishes 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 the period of 7 consecutive taxable years for the period of 5 consecutive taxable years.” (b) Technical Amendment.—Section 270 (relating to limitation on deductions allowable to certain individuals) is repealed. (c) Clerical Amendments.— (1) The table of sections for part VI of subchapter B of chapter 1 is amended by adding at the end thereof the following new item: “Sec. 183. Activities not engaged in for profit.” (2) The table of sections for part IX of subchapter B of chapter 1 is amended by striking out the item relating to section 270. (3) Section 6504 (relating to cross references) is amended by striking out the item relating to section 270. (d) Effective Date.—The amendments made by this section shall apply to taxable years beginning after December 31, 1969.