The Hobby Loss Issue Under
section 183
Multiple undertakings of a taxpayer may be treated as one
activity if the undertakings are sufficiently interconnected. Sec.
1.183-1(d)(1), Income Tax Regs.
The most important factors in making this determination are
the degree of organizational and economic interrelationship of the
undertakings, the business purpose served by carrying on the undertakings
separately or together, and the similarity of the undertakings. Id. The
Commissioner generally accepts the taxpayer's characterization of two or more
undertakings as one activity unless the characterization is artificial or
unreasonable.
Other factors considered in determining whether a taxpayer's
characterization is unreasonable include:
(1) whether the undertakings are conducted at the same
place; (2) whether the undertakings were part of the taxpayer's efforts to find
sources of revenue from his or her land; (3) whether the undertakings were
formed as separate activities; (4) whether one undertaking benefited from the
other; (5) whether the taxpayer used one undertaking to advertise the other;
(6) the degree to which the undertakings shared management; (7) the degree to
which one caretaker oversaw the assets of both undertakings; (8) whether the
taxpayer used the same accountant for the undertakings; and (9) the degree to
which the undertakings shared books and records. Mitchell v. Commissioner, T.C.
Memo. 2006-145 [TC Memo 2006-145] (citing Keanini v. Commissioner 94 T.C. 41,
46 (1990), Tobin v. Commissioner, T.C. , Memo. 1999-328, Estate of
Brockenbrough v. Commissioner T.C. Memo. , 1998-454, Hoyle v. Commissioner,
T.C. Memo. 1994-592 [1994 RIA TC Memo ¶94,592], De Mendoza v. Commissioner,
T.C. Memo. 1994-314 [1994 RIA TC Memo ¶94,314], and Scheidt v. Commissioner,
T.C. Memo. 1992-9 [1992 TC Memo ¶92,009]).
Robin S. Trupp v. Commissioner, TC Memo 2012-108 , Date Issued:
04/12/2012
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