27 February 2014
Posted in Articles
Horse Farming – a Business or Hobby?
A. General ExplanationSec. 183 of the Internal Revenue Code provides that a taxpayer cannot deduct expenses of an activity which are greater than income from that activity if the activity is “not engaged in for profit.” In other words, losses from an activity which is not “engaged in for profit” – a hobby – cannot be deducted against income from other sources. On the other hand, if an activity is engaged in for profit (a business rather than a hobby), losses are fully deductible against other income. (But see paragraph III for limitation on losses from passive activities.)