Is Your Business a Hobby? pt. 2
As I promised in “Do you have to suffer for your business?” and again in “Is your Business a Hobby? pt. 1” I’m going to explain what constitutes a business, based on the 9 tests that the IRS and the Tax Court has laid out to determine if a business is really a business.
A.) Manner in which the taxpayer carries on the activity
B.) The expertise of the taxpayer of his or her advisors
C.) The time and effort expended by the taxpayer in carrying on the activity
D.) Expectation that assets used in the activity may appreciate in value
E.) The success of the taxpayer in carrying on other similar or dissimilar activities
F.) The taxpayer’s history of income or losses with respect to the activity
G.) The amount of occasional profits, if any, which are earned
H.) The financial status of the taxpayer
I.) Elements of personal pleasure or recreation
In each of the next 5 parts, we’ll cover each of these elements in depth. More tomorrow…and the next day….and next day….you get the picture.