This is an update of my hobby loss roundup on March 26, 2024. Previous update was June 2, 2023. I should note that my new book Reilly’s Laws of Tax Planning (& Life!) includes a chapter on hobby loss cases which are the basis of the eighteenth law.
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Although I fell in love with Section 183 cases because they tend to be such great stories and so amusing, that will not be the focus of my seminar. My study of the case law and detailed analysis of over 300 cases has caused me to conclude that key elements of the section are misunderstood by many practitioners (and the public which pretty much goes without saying) and that practitioners tend to be too conservative in counseling clients. The focus of my seminar will be coaching clients and winning audits.
Here is a short version of my presentation.
And here is the roundup of more than a decade’s worth of coverage.
Tax Court Judge Suggests Glue Factory For Retired Thoroughbred Horses – August 28, 2023
Tax Court Leaning Harder On The Little Guys In Hobby Loss Cases – July 23, 2023
Third Circuit Upholds Tax Court In Large Dollar Horse Hobby Loss Opinion – April 13, 2023 Third Circuit approves Tax Court decision in Skolnick where Judge Lauber put extra emphasis on size of losses. Lauber is chided for his seventh factor analysis. Third Circuit emphasizes that expectation of profit is not a requirement.
Appreciation And A Strong Manager Win Hobby Loss Case – January 22, 2023
IRS Successfully Attacks Tax Shelter With Hobby Loss Rule – December 15, 2022
An Unusual Tax Court Hobby Loss Opinion – July 20, 2022
Tax Court Christmas Donkeys – A Present For Taxpayers With Losing Side Gigs – January 4, 2022 – Factor 8 (financial status of taxpayer) interpreted in an odd way. Taxpayers AGI was so high that the losses could not have been much of a motivation.
Tax Court Judge Emphasizes Magnitude Of Losses In Denying Horse Breeding Deductions – December 30, 2021 – Skolnick decision which was subsequently sustained by Third Circuit had special emphasis on the size of the losses.
Hobby Loss Deduction Developments In 2021 – December 22, 2021- Includes discussion of new audit guide, a must read for tax pros.
Honest Objective Trumps Realistic Expectation – Why Tax Practitioners Should Be More Aggressive On Hobby Losses – September 10, 2020
December 27, 2019 – IRS Wins Most Hobby Loss Cases But Don’t Let That Intimidate You – If you are only going to read one of my posts this is it.
December 18, 2019 – Tax Court Allows Long String Of Horse Losses – Five years of losses $250,000 proposed deficiency. Claiming activities were not separate precluded by return filing position.
September 11, 2019 – Dressage Trainer Complains Of Tax Court Mansplaining
August 20, 2019 – Hobby Loss Roundup And A New Law Of Tax Planning Announced
June 14, 2019 – Horse Breeders V IRS: Even The Losers Win – Why being aggressive on hobby loss can make sense
April 28, 2019 – Tax Court Judge Considers Passing On Deductions Unbusinesslike
April 11, 2019 – Searching For The Perfect Steak With An Imperfect Tax Plan – This is both the funniest and also the most important decision.
Section 183 was relatively new at this point, a provision of the Tax Reform Act of 1969. The Second Circuit dug into the legislative history and found that Congress was requiring that you have an “honest objective” of making a profit rather than a “reasonable expectation
March 26, 2019 – Hobby Loss Claim Goes Down In Flames
November 19, 2018 – Love Of Music Hurts Chance For Deductions And In Tax Court Use A Lawyer
February 1, 2018 – Joy Ford May Sing The Tax Court Blues
November 27, 2017 – Stunning Tax Court Victory Against IRS In Horse Case
July 27, 2016 – Saga Of An Entrepreneurial Family Catching A Tough IRS Audit
July 7, 2016 – Restoring Fifties Plymouths Ruled Business Not Hobby By Tax Court – Lawyer pro se
May 31, 2016 – Airplane Tax Deductions Do Not Fly For Urologist
May 7, 2016 – TIGTA Pushes IRS To Crack Down On Hobby Loss Deductions – Important insight into type of return that will trigger hobby loss audit.
March 2, 2016 – Tax Losses From Genetically Engineered Deer Allowed
December 11, 2015 – Photographer Inspired By Ansel Adams Does Not Fare Well Against IRS In Tax Court
April 10, 2015 – Tax Court Allows Multimillion Multiyear Arabian Horse Losses –
November 21, 2014 – Can Horse Owners Win In Tax Court By Partnering With Trainers?
October 25, 2014 – Motocross Racing With Tax Deductible Dollars Works This Time – Not actually a hobby loss case, but covers similar ground. Father’s construction company-sponsored son’s motocross racing. Taxpayer won.
October 8, 2014 – Susan Crile Paints A Picture Of Tax Court Victory For Artists
October 6, 2014 – Tax Court Judge Appreciates Art More Than Your Average Revenue Agent – This is a very important case particularly if you can’t get a business plan out of your client.
August 15, 2014 – IRS Stampedes A Cattle Shelter
April 28, 2014 – Tax Court Denies Amway Losses – Again
October 13, 2013 – We’re With The Band – Kind Of –
September 23, 2013 – Musician Wins Hobby Loss Case. Pro se taxapayer wins after firing lawyer. Accountant did not warn him about hobby loss exposure.
August 4, 2013 – Ranching Is A Hard Business But Tax Examiners Can Think It Is Fun – Montana state tax case, but follows federal principles.
May 16, 2013 – Leisure Suit Larry Shows Up In Tax Court Decision – Airplane leasing
May 9, 2013 – Book On New Jersey Wines Does Not Support Deducting Trips To France
February 21, 2013 – Bill Romanowski’s Tax Court Loss Not A Typical Horse Case – Section 183 case. Tax shelter not hobby.
December 4, 2012 – Sprint Racing Driver Can’t Convince Tax Court He Is In It For The Money
October 31, 2012 – The Ryan Bailey Story As A Tax Tale
October 27, 2012 – Track Star Ryan Bailey’s Coach Beats IRS In Tax Court
August 2, 2012 – Rafalca London Olympics Medal Or Not – No Current Tax Savings Hobby loss was an issue in the 2012 presidential campaign.
June 28, 2012 – While Dogs Against Romney Are Rooting For Rafalca I’m Studying Hobby Loss Cases – Hobby loss was an issue in the 2012 presidential campaign.
January 30, 2012 – IRS Wins a Horse Case for a Change
January 16, 2012 – Photographing, Writing, Flying But Ultimately Not Deducting
August 13, 2011 – Horse Breeders Win In Tax Court
June 15, 2011 – Selling Soap as a Hobby – Amway IBO’s in Tax Court – 23 cases. All Amway cases up to that point. Spoiler alert. They all mostly lose.
May 5, 2011 – Hard Rock Case Still Up in the Air Though Some Elements Well Grounded – Unified business enterprise
For great value continuing professional education. I recommend the Boston Tax Institute
You can register on-line or reach them by phone (561) 268-2269 or email vc@bostontaxinstitute.com. Mention Your Tax Matters Partner if you contact them.
For articles oriented toward tax professionals check out Think Outside The Tax Box.
