Friday, November 4, 2011

Suffering Has Never Been Made a Prerequisite to Deductibility.

I came across this in one of my readings. I really like the hi-lighted quote – future reliance on that quote could be quite interesting...

Income Tax—Hobby Loss: Taxpayer is a Certified Gilder Flight Instructor who performed flight instruction for the Boeing Employees Soaring Club. On 8/1/03, he formed an LLC to provide private glider flight instruction and glider plane rides. The LLC conducted activities primarily on weekends from March through November during times of good visibility. For promotion, taxpayer maintained a website, distributed flyers at airports and aviation-related businesses, and advertised in a flying publication. Nevertheless, the IRS audited his 2005, 2006, and 2007 income tax returns and decided that the glider activities were not conducted with the intent of making a profit under IRC Sec. 183. The Tax Court disagreed after going through the (nonexclusive) list of factors in Reg. 1.183-2(b) for determining whether a person is engaged in an activity for profit. In particular, the Tax Court noted that a business "will not be turned into a hobby merely because the owner finds it pleasurable; suffering has never been made a prerequisite to deductibility." William Weller, TC Memo 2011-224 (Tax Ct.).

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