If a Taxpayer Can Satisfy the Three-Out-Of-Five Year Presumption Test

question 94

True/False

If a taxpayer can satisfy the three-out-of-five year presumption test associated with hobby losses, then expenses from the activity can be deducted in excess of the gross income from the activity.

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Definitions:

Illegal

Activities or actions that are forbidden by law and punishable by fines, penalties, or imprisonment.

Restrictive Covenant

A clause in a contract or deed limiting what the owner of the property can do with it.

Injunction

A court order requiring an individual or entity to do or cease doing a specific action.

Competing Business

A business that offers the same or similar products or services as another business, thereby competing for the same market share.