Is the Schedule C on your tax return a business or a hobby? Schedule C needs to have a profit motive to be considered a business.
The following are the nine non-exclusive factors contained in Treas. Reg. § 1.183-2(b) the IRS uses to determine profit motive for Schedule C businesses:
- the manner in which the taxpayer carried on the activity,
- the expertise of the taxpayer or his or her advisers,
- the time and effort expended by the taxpayer in carrying on the activity,
- the expectation that the assets used in the activity may appreciate in
- the success of the taxpayer in carrying on other similar or dissimilar
- the taxpayer’s history of income or loss with respect to the activity,
- the amount of occasional profits, if any, which are earned,
- the financial status of the taxpayer, and
- elements of personal pleasure or recreation.
No one single factor controls and other factors may be considered in determining the profit motive of a business. Please call GTL at (818) 509-0066 should you have questions or need additional information.