ThatsBoBo - 9:40 pm on Dec 10, 2012 (gmt 0)

Business or Hobby?

From the IRS:

In order to make this determination, taxpayers should consider the following factors:

•Does the time and effort put into the activity indicate an intention to make a profit?
•Does the taxpayer depend on income from the activity?
•If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
•Has the taxpayer changed methods of operation to improve profitability?
•Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
•Has the taxpayer made a profit in similar activities in the past?
•Does the activity make a profit in some years?
•Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.

[irs.gov...]