Hobby Losses: How to Not Get Trapped

Marci RomneyBlog

Horse breeding losses aren’t always hit by the hobby loss disallowance.  A man who bred, trained, and showed horses has reported his losses since 1997.  So how did he do it, and what can you do?

  1. Be an expert in the field
  2. Have a plan (in this case it was to increase brand recognition)
  3. Keep good records
  4. Expand or restrict the business as circumstances dictate

Although the man enjoyed his time with the horses, the activity was physically demanding and required lots of work from him and others.  These facts and more led the Court to decide that he had the requisite profit motive to be treated as a trade or business, whereby his losses were deductible. (Besten, TC Memo. 2019-154)

See https://www.kiplinger.com/ for more information