Section 183 was enacted as part of the Tax Reform Act of 1969.  Regulations were issued in 1972.  They are mostly unchanged.  One of the earlier people to run up against Section 183 was Maurice Dreicer.  In 1979, the Tax Court upheld deficiencies totaling $30,000 for 1972 and 1973. (You could call that $180,000 in today’s dollars).

Mr. Dreicer’s “business” was traveling around the world and going to fine restaurants which would endeavor to serve him the”perfect steak”.  He was planning a book titled My 27 Year Search for the Perfect Steak — Still Looking.  He was already a published author with The Diner’s Companion.

Although it ended up not doing him any good Dreicer’s winning appeal to the DC Circuit set an important precedent.

We perceive no basis for disturbing the Tax Court’s finding on the nature of the undertakings generating the losses for which deductions are sought. We do not accept, however, the legal test that the court employed in ruling on deductibility. We hold that a taxpayer engages in an activity for profit, within the meaning of Section 183 and the implementing regulations, when profit is actually and honestly his objective though the prospect of achieving it may seem dim . Because the Tax Court applied a different standard, we reverse and remand for redetermination of Dreicer’s deduction claims. (Emphasis added)