If a taxpayer makes a profit in three of the five consecutive years ending with the taxable year,the burden of proof is on the IRS to prove the activity is a hobby rather than a trade or business.

Question

Quizplus · Accepted Answer

The IRS presumes an activity is for profit if it shows a profit in three of the last five years, shifting the burden of proof to the IRS to prove otherwise.

If a Taxpayer Makes a Profit in Three of the Five