Hobby Loss Rules
Author: A.J. Reynolds
| CPE Credit: |
1 hour for CPAs
1 hour Federal Tax Related for EAs and OTRPs
1 hour Federal Tax Law for CTEC |
Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2028 to receive credits. NOTE: Go to My Professional Profile in your CCH CPELink account settings to ensure your name, and PTIN number; matches your PTIN card
Millions of people enjoy hobbies that are also a source of income. From catering to baking cupcakes, crafting homemade jewelry to wind chimes -- no matter what a person’s passion, we as tax professionals must determine if our client has a business or Hobby.
The rules for how to report the income and expenses depend on whether the activity is a hobby or business.
Sometimes the tax law is so obvious that one need not be an expert to conclude the result of a case. But at times we allow ourselves to be so obscured in details that we can miss the obvious, even in the world of complicated tax law.
This course provides a useful overview of determining if a business venture is a hobby subject to limitations on deductions or if the business venture is truly a trade or business and deductions are fully allowed under IRC Section 162.
Publication Date: May 2025
Designed For
All Tax Professionals who have clients starting up or currently have businesses
Topics Covered
- Hobby Loss Overview
- Safe Harbor Presumption
- Hobby Income
- Hobby Expenses
- Presumption of Profit and Nine Factors
- Case Law
- Due Diligence
Learning Objectives
- Identify the Nine Relevant Factors
- Explain what is a “Trade or Business”
- Identify relevant case law
- Explain how to develop a checklist to determine hobby vs Trade or Business
- Explain how to prove your client has a trade or business
Level
Basic
Instructional Method
Self-Study
NASBA Field of Study
Taxes (1 hour)
Program Prerequisites
None
Advance Preparation
None
