Hobby or Business? - Posted by ScottS

Posted by JHyre in Ohio on February 02, 2002 at 06:04:12:

You are presumed to have a profit motive and be engaged in a trade or business or income producing activity, as opposed to a hobby, if you can show gains for 3 of the last 5 years. If you cannot meet that test, you can still easily show a profit motive by:

  1. Treating the activity as a business…good books, etc.; and
  2. Showing that there was or is a good liklihood of making a profit, both subjectively (“I believe it”) and objectively (“Others don’t laugh at my belief that I could make a profit”).

John Hyre

Hobby or Business? - Posted by ScottS

Posted by ScottS on February 01, 2002 at 16:46:04:


How many consecutive years can a business expense away profit and show loss before it is in danger of being classified a hobby?

If it does go an extended amount of time and does get classified a hobby can the IRS backtrack and make you pay taxes on previous years?