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?

Question

Quizplus · Accepted Answer

According to the IRS, if an activity generates a profit in at least three out of five consecutive years (or two out of seven consecutive years for horse racing), it is presumed to be a business. In this case, Mary's antique store generated a profit in three consecutive years (2015-2017) and a loss in the following two years (2018-2019). Therefore, the activity is presumed to be a business. However, the IRS may still prove that it is a hobby if there is evidence to support that Mary did not have a profit motive.

For the Years 2015 Through 2019 (Inclusive)Mary,a Best-Selling Author,has Been