In Determining Whether an Activity Should Be Classified as a Hobby

question 89

Multiple Choice

In determining whether an activity should be classified as a hobby, the tax law provides a rebuttable presumption with regard to the profits or losses of an activity.Which of the following statements describes the profit/loss test which must be satisfied in order to meet the presumption that the activity is not a hobby?

• A)The activity shows a profit for 3 of the 5 previous years.
• B)The activity shows a loss for 3 of the 5 previous years.
• C)The activity shows a profit for 3 of the 7 previous years.
• D)The activity shows a loss for 3 of the 7 previous years.
• E)None of the above.

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Definitions:

Entrepreneurship

Engaging in the process of founding businesses, assuming financial jeopardy with the anticipation of earning profits.

Entrepreneurship

Undertaking the initiative to create one or more businesses, accepting the monetary risks for the potential of making profit.

Entrepreneurs

Entrepreneurs are individuals who identify business opportunities, acquire and organize the necessary resources to capitalize on them, and bear the associated risks and rewards.

Myths

Widely held but false beliefs or ideas, often used to explain natural phenomena or cultural practices.