Thus, although the Chamberlains had no
profit motive, thereby justifying the enhanced interest assessment, their reliance on an expert allowed them to avoid the negligence penalty.
Although the idea of a hobby is generally associated with fun and recreation, the element of personal pleasure derived from engaging in a hobby is just one of the factors used to determine the existence of a
profit motive.
Individuals engaged in certain endeavors cannot deduct their losses if the endeavor is "not engaged in for profit." The presumption of a
profit motive can be achieved if the activity shows a profit in three years out of five (two years out of seven for horses).
Some have suggested that making the partnership a party to a corporate buy-sell agreement may give the partnership a sufficient objective to carry on business for joint
profit motive. In any event, this aspect of the transfer strategy deserves special attention.
165(c) contains a trade or business or
profit motive limitation aimed primarily at individual taxpayers.
DV Saini, Central Public Information Officer, Rohtak said there is no
profit motive behind the initiative.
The inability of a taxpayer to deduct even a portion of the hobby expenses while recognizing all the hobby income in adjusted gross income makes establishing a
profit motive for a hobby activity even more desirable.
What is the place of a
profit motive in the production of knowledge at public universities?
Points that the court found weighed against the taxpayer's claim of a
profit motive included that although the taxpayer engaged the services of a bookkeeper and a CPA, he did not operate the business in a businesslike manner because he never reviewed the ranching activity's financial statements with either the bookkeeper or the CPA; he did not establish a formal written business plan; and, after five years of operating the ranch at a loss, the taxpayer never changed the operating structure of the ranching activity.
If the IRS challenges the
profit motive and a taxpayer fails to substantiate the
profit motive, the taxpayer will lose all the deductions.
But, despite evidence and experience to the contrary that a pure
profit motive is unsustainable, many firms still operate in this manner.
While it is not prohibited or discouraged for a cooperative to generate income per se, the
profit motive is only at the outer fringes of its goals.