On Sun, 16 Mar 2008 12:28:23 EDT, SMF <smfwdf[at]comcast.net> wrote:

- quote -


The title "hobby loss rules" is somewhat misleading. The Code does
not use these words and I don't believe they appear in the
regulations, either. What the code actually says is that an activity
"not engaged in for profit" must show a profit in three out of five
years or the losses incurred in any year will be disallowed. So, the
three out of five rule should not be followed blindly. What you must
do is build a case that you are actually engaging in the particular
activity to make money. If you can prove that, the "hobby loss" rules
don't apply.

I once had a client with a Servicemaster franchise who showed losses
in most years. He asked me about these rules. My answer was that no
one mops floors for fun! He wouldn't be doing the business if he
didn't think he could make money. We never had a problem with IRS.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Had a sch business for several years - boat charter business. We did
not do any business this year but continue to have depr and storage
fees. We have had losses in the prior 3 years. Should we just not
file sch c this year? Worried about the hobby rule anyway.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >