IRS Wins Most Hobby Loss Cases But Don’t Let That Intimidate You
If your client has something that they want to do and can tell you with a straight face that they are trying to make money at it, you should counsel them to take the losses, but only if they are willing to act in a businesslike manner. Separate accounts. Strong substantiation. But most importantly at least once a year talk to your client about why there were losses and what they are going to do differently in the future in order to change things. Document those discussions.
It does not matter that profitability is improbable, it just has to be sincerely pursued.
Tax Court Allows Long String Of Horse Losses
Photo credit Midge Ames. Originally published on Forbes.com. A long string of losses in a horse-related business may well attract IRS attention. Don’t despair. If you...
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.