For the years 2014 through 2018 (inclusive) Mary, a best- selling author, has been involved in operating an antique store. In 2014, 2015 and 2016 her revenue exceeded the expenses from the activity. In 2017 and 2018, the antique store generated a loss. Which statement is correct?

Question

Quizplus · Accepted Answer

The IRS presumes an activity is a business if it shows a profit in at least three of the last five years. Since Mary's antique store was profitable in 2014, 2015, and 2016, it is presumed to be a business. However, the IRS can challenge this presumption and prove it is a hobby.

For the Years 2014 Through 2018 (Inclusive) Mary, a Best-