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.

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