Business Expenses and Hobby Losses

CPAs, EAs, CRTPs

The IRS frequently scrutinizes taxpayer activities under IRC Section 183, the “hobby loss” rules, which limit deductions for activities not engaged in for profit. This course outlines the key factors used to distinguish legitimate business losses from nondeductible hobby losses and reviews the Tax Court’s application of the “ordinary and necessary” standard. Practitioners will gain insights into common case elements to better advise clients on maximizing deductions while avoiding compliance pitfalls.

• Determine permissible deductibility of business expenses under Code §162
• Distinguish for-profit activities from hobby activities using the criteria in Code §183
• Identify the required method for allocating expenses pursuant to Code §183
• Name the elements of the 9-part test under the hobby loss rules
• Recognize and determine the deductible expenses when an activity fails to meet the “profit motive” test