One of the stickiest areas of tax practice is determining if a taxpayer’s passion is a hobby or a business for tax purposes. Of course, the IRS cares little about such questions when taxpayers profit from their hobbies-the ready answer is that such profits are always taxable. Losses, however, are a different issue and taxpayers who lose money in the course of their hobbies often find that they are unable to write off those losses for tax purposes under the weight of much Tax Court precedent and IRS regulations and interpretations. In TAXES: The Tax Magazine, Professor Paul J. Brennan outlines the history, current thinking and many contradictions in how the Tax Court has looked at whether an enterprise is a hobby or a business for tax purposes.
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This story is from the CCH’s monthly Focus on Tax newsletter, which provides advise and guidance on federal and state tax issues for tax and accounting professionals.
Read this article from CCH’s Journal of Taxation of Financial Products.