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Strangest hobby ever

March 30, 2010

The Tax Court yesterday disallowed losses from an accounting practice under the "hobby loss" rules of Section 183.

The objective facts indicate that petitioner's primary purpose was not to realize a profit. Petitioner acknowledged that relatively few of his clients ever paid, yet his expenses consistently exceeded his revenues by a sizable margin. In fact, petitioner admitted that his "business" had been profitable for only 1 of its 10 years of operation. Furthermore, petitioner's own testimony reveals that he subjectively did not intend to operate his "business" for profit. Petitioner testified that despite the difficulties in collecting from his clients, he continued his activity "both as a service to the public and * * * as a contribution to the community".

Most people would prefer a more glamorous form of community service, like picking up dog poop at the local park.

Cite: Elverson, T.C. Summ. Op. 2010-36

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