A major feature of a business is that you engage in it to make a profit. In most cases, you would engage in a hobby for sport or recreation, not to make a profit.
In determining whether you have business or hobby activity, you should take into account all facts and circumstances with respect to the activity. No one factor alone is decisive. Consider the following factors in determining if you are operating a business:
- Whether you carry on the activity in a businesslike manner.
- Whether the time and effort you put into the activity indicate you intend to make it profitable.
- Whether you depend on income from the activity for your livelihood.
- Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
- Whether you change your methods of operation in an attempt to improve profitability.
- Whether you or your advisers have the knowledge needed to carry on the activity as a successful business.
- Whether you were successful in making a profit in similar activities in the past.
- Whether the activity makes a profit in some years and how much profit it makes.
- Whether you can expect to make a future profit from the appreciation of the assets used in the activity.
We can help you determine if you have a business or hobby!
Call Corvino & Verwys your Certified Tax Resolution Specialists today at (610) 863-8347.
