Do you have a hobby or a business?
A recent Tax Court decision reminds us of the importance of keeping good records.
The Tax Court held that a taxpayer, who had a full-time job as a software engineer, did not engage in his side business of selling sports memorabilia for profit. The court examined six of the nine factors included in the regulations and determined the taxpayer did not have a profit motive.
The taxpayer did not keep accurate books and records, was not an expert (nor consulted with experts), did not devote much of his personal time to the activity, did not insure his collection, had a history of substantial losses, and had substantial income from other sources.
Consequently, the deductions relating to the memorabilia activity were denied. If you engage in a small business and think it may be a hobby it may be time to talk to us