IRS: What is a Business & What is a Hobby?

What is a business, and what is a hobby? The answer matters from a tax perspective, and be wary if you breed, show, train, or race horses.  Typically, hobbies are activities that you perform for fun, not profit.  But the failure to turn a profit does not make an activity a hobby, as certainly many businesses (intentionally or not) do not turn a profit.
  Generally, the IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — or, at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.  The IRS does not horse around; these issues are complex and can spur litigation. Trot over to this IRS publication on the topic parsing the nine factors typically considered if you would like to make hay out of their helpful guidance.
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ATTORNEY ADVERTISEMENT; PRIOR RESULTS DO NOT GUARANTEE A FUTURE OUTCOME
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