Profit Motive and Hobbies
Overview
Profit Presumption
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Breeding, training, showing or racing horses if a profit in 2 of 7 consecutive years
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Other businesses if a profit in 3 of 5 consecutive years
Limit on deductions and losses – order of use
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Home mortgage interest, taxes, casualty losses
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Deductions that don’t reduce basis
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Deductions that do reduce basis (i.e., depreciation)