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Hobby Loss

   Also found in: Legal 0.01 sec.
Hobby Loss
A loss a taxpayer may not deduct from his/her taxable income because it occurred in the pursuit of personal pleasure. Suppose one sells lemonade for fun on Saturdays and takes a loss in doing so. This will likely be considered a hobby loss because one is not likely to be actively pursuing profit. The IRS applies what is called the "hobby loss rule" to determine whether it considers a loss to be hobby or business related; this rule states that an activity profitable three years out of every five can be considered a business. So the lemonade stand, which may never be profitable, will probably be considered a hobby loss.

Hobby Loss
A nondeductible loss arising from a personal hobby as contrasted with a loss arising from an activity engaged in for profit.


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Nevius, editor-in-chief The Tax Adviser Also look for articles on the following subjects in the November 2009 issue of The Tax Adviser: * Aggregating activities to avoid the hobby loss rules.
For example, note that it is important to consider basis issues, the effect of the at-risk rules, the passive activity rules, and the hobby loss rules.
The Tax Court disallowed an IRS auditor's deductions for breeding greyhounds as a hobby loss.
 
 
 
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