distributions 5.88 12.3 33.3 27.0 21.6 3.46 Kiddie tax provisions 0.98 20.5 36.6 20.0 22.0 3.41 Vacation home rules 2.93 14.6 40.5 23.4 18.5 3.40 Capital gains & losses 5.34 16.0 37.4 28.2 13.1 3.26 Self-employed provisions 3.90 17.6 42.9 21.5 14.2 3.23 Depreciation 6.83 21.5 31.2 25.9 14.6 3.19 Hobby losses
3.92 27.5 37.3 20.0 11.3 3.06 Itemized ded.
[section]1.183-2 relating to hobby losses
. The case study was developed so that the facts and circumstances would have to be carefully examined in order to determine whether the golfing activity should be considered a trade/business or a hobby.
In its guidance related to hobby losses
, the IRS specifically lists the following activities or roles that are considered possible hobbies: auto racing, craft sales, bowling, stamp collecting, dog breeding, yacht charter, art, horse breeding, farming, gambling, fishing, horse racing, photography, writing, working as an entertainer, airplane charter, rentals, motocross racing, and direct sales.
After first discussing the basics of deductions, it covers the following topics: hobby losses
, start-up expenses, inventory, home office deductions, travel and entertainment expenses, retirement deductions, and how to stay out of trouble with the ILLS.
Well known to tax professionals, these red flags include having large deductions relative to income, reporting hobby losses
as a trade or business activity, and using a tax preparer that has been targeted by the IRS for claiming false deductions.
The attorney proved that the losses were not hobby losses
Easter, TC Memo 1992-188 Taxpayer should know that hobby losses
are not deductible in activity without profit motive.
Hobby loss: In Ballard,(40) the Tax Court held that an investment banker generated only hobby losses
from his S corporation's yacht-chartering activity.
However, few taxpayers have elected the "alternative" presumption, since the election alerts the IRS that the return includes possible hobby losses
, as well as extends the statute of limitations.
183 disallows certain deductions associated with activities not engaged in for profit (so-called "hobby losses