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TITLE 26-INTERNAL REVENUE CODE (2) Certain property used in the clearing of land (A) Allowance for depreciation The expenditures to which subsection (a) applies shall include a reasonable allowance for depreciation with respect to property of the taxpayer which is used in the clearing of land for the purpose of making such land suitable for use in farming and which, if used in a trade or business, would be prop- erty subject to the allowance for depreci- ation provided by section 167. (B) Treatment as depreciation deduction For purposes of this chapter, any expen- diture described in subparagraph (A) shall, to the extent allowed as a deduction under subsection (a), be treated as an amount al- lowed under section 167 for exhaustion, wear and tear, or obsolescence of the prop- erty which is used in the clearing of land. (e) Election The election under subsection (a) for any tax- able year shall be made within the time pre- scribed by law (including extensions thereof) for filing the return for such taxable year. Such election shall be made in such manner as the Secretary may by regulations prescribe. Such election may not be revoked except with the consent of the Secretary. (Added Pub. L. 87-834, § 21(a), Oct. 16, 1962, 76 Stat. 1063, and amended Pub. L. 94-455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) AMENDMENTS 1976-Subsec. (e). Pub. L. 94-455 struck out "or his delegate" following "Secretary". EFFEcTIVE DATE Section 21(d) of Pub. L. 87-834 provided that: "The amendments made by this section [enacting this sec- tion and amending section 263(a) of this title] shall apply with respect to taxable years beginning after December 31, 1962." SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 263, 1251, 1252 of this title. § 183. Activities not engaged in for profit (a) General rule In the case of an activity engaged in by an in- dividual or an electing small business corpora- tion (as defined in section 1371(b)), if such ac- tivity 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- (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 ex- ceeds 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 undeo section 162 or under paragraph (1) or (2) of s(-r- tion 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 attrib- utable to such activity (determined without regard to whether or not such activity is en- gaged in for profit), then, unless the Secretary 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 con- sists in major part of the breeding, training, showing, or racing of horses, the preceding sen- tence shall be applied by substituting the period of 7 consecutive taxable years for the period of 5 consecutive taxable years. (e) Special rule (I) In general A determination as to whether the pre- sumption provided by subsection (d) applies with respect to any activity shall, if the tax- payer 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 sentence of such subsection) follow- ing the taxable year in which the taxpayer first engages in the activity. 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. (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 activ- ity, if the gross income derived from the ac- tivity for 2 or more of the taxable years in such period exceeds the deductions attribut- able to the activity (determined without regard to whether or not the activity is en- gaged in for profit). (3) Election An election under paragraph (1) shall be made at such time and manner, and subject to such terms and conditions, as the Secre- tary may prescribe. (4) Time for assessing deficiency attributable to ac. tivity 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 § 183 Page 184