For the years 2010 through 2014 (inclusive)Mary,a best-selling author,has been involved in operating an antique store. In 2010,2011 and 2012 her revenue exceeded the expenses from the activity. In 2013 and 2014,the antique store generated a loss. Which statement is correct?

Question

Quizplus · Accepted Answer

According to the IRS, an activity is presumed to be a business if it generates a profit in at least three of the past five years, including the current year. Since Mary's antique store generated a profit in 2010, 2011, and 2012, the activity is presumed to be a business. However, the IRS may argue that the losses incurred in 2013 and 2014 indicate that the activity is actually a hobby. So, the activity is presumed to be a business, but the IRS may prove otherwise.

For the Years 2010 Through 2014 (Inclusive)Mary,a Best-Selling Author,has Been