Edition 62

Section 183, which limits or entirely eliminates deductions attributable to activities not entered into for profit, may be coming in for more attention from an invigorated IRS. Section 183 is commonly referred to, not without reason, as the hobby loss rule. Based on my extensive study of the case law, I believe that practitioners widely misunderstand 183. I have noted cases where taxpayers had not gotten a heads up from their adviser. More commonly there is a misunderstanding of 183(d), a presumption in favor of taxpayers that is rarely relevant at all, but which the agency can never use against them. Most important is the failure to appreciate that it is the objective of making a profit not the expectation that is necessary. With that in mind here are the most recent developments...

“I’m going to get a pedicure later,” my wife said to me one Saturday morning. I quickly replied, “You should start an OnlyFans so you can deduct it.” (Everything has a tax angle when you’re married to a tax person.) “Is that really a thing?” she inquired. “Well…” I said, “It depends...” (Nothing is certain when you’re married to a tax person.) “...ordinarily I would say no, but in this case, it might be necessary.” (Everything is a tax pun when you’re married to a tax person.) In the “post” covid era, many taxpayers have turned to the gig economy. (Aside from the number of companies paying workers as contractors when they should actually be employees, but that’s a different topic for a different time.) Many of these gig workers are new to being self- employed and wonder what exactly they can “write off.”

Here's the latest filings and tax court cases for July, 2023!