Millions of people enjoy hobbies that are also a source of income. From catering to baking cupcakes, crafting homemade jewelry to wind chimes — no matter what a person’s passion, we as tax professionals must determine if our client has a business or Hobby. The rules for how to report the income and expenses depend on whether the activity is a hobby or business. Sometimes the tax law is so obvious that one need not be an expert to conclude the result of a case. But at times we allow ourselves to be so obscured in details that we can miss the obvious, even in the world of complicated tax law.
This course provides a useful overview of determining if a business venture is a hobby subject to limitations on deductions or if the business venture is truly a trade or business and deductions are fully allowed under IRC Section 162.
Learning Objectives:
Extrapolate & Critique the Nine Relevant Factors
Examine what is a “Trade or Business”
Interpret the presumption that an activity is engaged for profit
Explore relevant case law
Provide and evaluate Client Questionnaire on Trade or Business Factors Regarding Profit Motive
Formulate a plan on how to prove an activity is a trade or business when IRS says otherwise.
Opinions expressed by Mr. Reynolds are solely his own and do not necessarily express the views or opinions of TaxAct Professional.
