For showing business losses are not hobby losses
, an area in which profit motive is critical, the act of maintaining daily records is itself an indicator of that profit motive.
In its guidance related to hobby losses
, the IRS specifically lists the following activities or roles that are considered possible hobbies: auto racing, craft sales, bowling, stamp collecting, dog breeding, yacht charter, art, horse breeding, farming, gambling, fishing, horse racing, photography, writing, working as an entertainer, airplane charter, rentals, motocross racing, and direct sales.
distributions, kiddie tax provisions, vacation home rules, capital gains and losses, self-employed provisions, depreciation, hobby losses
, phase-out of itemized deductions, and casualty losses.
Since hobby losses
are limited to the extent of income, the advantageous position for the client in this situation would be that of a trade or business.
Foster (21) resulted in a negative outcome on hobby losses
for the taxpayer who maintained the records for his horse racing and breeding business on QuickBooks, but did so, according to the court, only "in order to memorialize transactions for tax reporting purposes, rather than to analyze expenses to determine profitability.