For the years 2015 through 2019 (inclusive) Mary, a best-selling author, has been involved in operating...
For the years 2015 through 2019 (inclusive) Mary, a best-selling author, has been involved in operating an antique store. In 2015, 2016 and 2017 her revenue exceeded the expenses from the activity. In 2018 and 2019, the antique store generated a loss. Which statement is correct?
A) The activity is a business. The IRS cannot prove it is a hobby.
B) The activity is a hobby. Mary cannot prove it is a business.
C) The activity is presumed to be a business. However, the IRS may prove it is a hobby.
D) The activity is presumed to be a hobby. However, Mary may prove it is a business.
Homework Answers
Option c is correct.
The activity is presumed to be a business. However, the IRS may prove it is a hobby.
It is assumed to be business because Mary earned profit for three years.
It has generated loss for 2 years, so there is a chance that IRS may prove that it is a hobby for Mary and not business if it does not meet the other requirements of record keeping, documentation, etc.
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