Hobby Losses Disallowed

In one case, a highly successful business owner also conducted some sideline activities, including a farm with horses. His only crop was hay. A neighboring farm baled it and took half; he kept the other half for his horses. Because he never sold his crop and didn’t treat the activity as a business (e.g., no separate books and records and no separate name for the activity), a federal appellate court agreed with the Tax Court that this was a hobby and not a business, so his substantial losses year after year were disallowed. #IdeaoftheDay