If an activity is considered a hobby,which of the following is true?
A)None of the expenses connected with the activity are deductible.
B)None of the income connected with the activity is included in income.
C)The deductible expenses connected with the activity are limited to the income from the activity.
D)The IRS has the burden to prove an activity is a hobby.

Question

Quizplus · Accepted Answer

If an activity is considered a hobby, the deductible expenses connected with the activity are limited to the income from the activity. This means that if the expenses exceed the income, the excess cannot be used to offset other income or tax liability. The IRS may also require the taxpayer to prove that the activity is not a hobby but a legitimate business, rather than having the burden to prove it is a hobby. Option A is incorrect because some expenses related to a hobby may still be deductible, such as those related to generating income from the hobby. Option B is incorrect because income from a hobby should still be reported on the tax return.

If an Activity Is Considered a Hobby,which of the Following