Building Eco-friendly Home: Hobby or Business?

If an activity is a hobby, income is taxable but no deductions are currently allowed. If it’s a business, then ordinary and necessary costs are deductible. A partnership in the eco-friendly commercial and residential construction/consulting business built an eco-friendly home in golf community. The owner maintained a golf membership and the family used the home several times a month. Nonetheless, the Tax Court allowed business deductions because the partnership, through the actions of its partners, had a bona fide profit objective. The home served as a model for customers, the partners were knowledgeable in eco-friendly construction, and they spent countless hours in the construction and upkeep of the model. #IdeaoftheDay

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