Monday, April 23, 2012

Hobby/loss guidelines under section 183

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 (212) 588-1113

No comments: