Homebuilt tax writeoff

"C J Campbell" wrote:
...
I am not sure what you are claiming is a fabrication. Are you
saying that
Amazon.com and real estate tax shelters would not fail the 3 out of
5 test?
....

Pure summary, assuming all this is inappropriate for the NG. Hobby
loss rules do not apply to "C" corporations like Amazon or the
airlines. "Equal protection" arguments don't apply to noncriminal tax
issues, as Congress can allow a tax benefit, or deny a benefit, for
makers of widgets, but not gadgets. It can creep into tax-exempt org
issues, though. The practical aspects of real-life hobby loss issues
tend to render the 3/5 test moot. Recent developments in the shift of
burden of proof in Tax Court and reimbursement of representational
fees renders even the "rebuttable presumption" rather moot. IOW, it's
all a pure factual question, whether the losing, alleged business
passes the basic sniff test for hobbies.

Unless you are an IRS auditor, of course....

Formerly, but mere Auditor hell. :-) Many yrs in technical,
managerial, and training matters; civil and criminal litigation.

Reg,
Fred F.

"TaxSrv" wrote in message
...
"C J Campbell" wrote:
...
I am not sure what you are claiming is a fabrication. Are you
saying that
Amazon.com and real estate tax shelters would not fail the 3 out of
5 test?
....

Pure summary, assuming all this is inappropriate for the NG. Hobby
loss rules do not apply to "C" corporations like Amazon or the
airlines. "Equal protection" arguments don't apply to noncriminal tax
issues, as Congress can allow a tax benefit, or deny a benefit, for
makers of widgets, but not gadgets. It can creep into tax-exempt org
issues, though. The practical aspects of real-life hobby loss issues
tend to render the 3/5 test moot. Recent developments in the shift of
burden of proof in Tax Court and reimbursement of representational
fees renders even the "rebuttable presumption" rather moot. IOW, it's
all a pure factual question, whether the losing, alleged business
passes the basic sniff test for hobbies.

Unless you are an IRS auditor, of course....

Formerly, but mere Auditor hell. :-) Many yrs in technical,
managerial, and training matters; civil and criminal litigation.

OK, I think we are on the same page, then. There is nothing preventing Ron
from setting up a "C" corp. Equal protection arguments do require that a law
or regulation be applied to everyone the same way. Thus, if profitability 3
out of 5 years presumes a business for profit, then it has to be applied to
everyone that way unless some exception is spelled out in the code, which
there isn't. Thus, the law can apply to widget makers or gadget makers, but
it applies equally to both unless Congress specifically says it applies only
to one or the other.

And my point is that the 3/5 test is irrelevant for almost all practical
purposes.

My own philosophy is: if there were no taxes would somebody do this as a
business? If yes, then the IRS is unlikely to have any problem with it,
either.

My main point is that neither Ron nor anybody else should base a business
decision simply on whether it passes some IRS rule which is probably
irrelevant anyway. You should make business decisions on the basis of
whether they are good business. If you do that then the IRS is nearly always
going to fall in line with what you want to do.

"C J Campbell" wrote:

OK, I think we are on the same page, then.
There is nothing preventing Ron
from setting up a "C" corp.

A C Corp is of no tax benefit for an activity which nets out losses
over the years. That's why Congress didn't include them in the hobby
loss rules. Nobody ever did it for something which could be viewed as
a hobby, nor ever would.

Equal protection arguments do require that a law
or regulation be applied to everyone the same way.

Cite a case where IRS lost on those grounds, other than a criminal
case, and rarely even there.

Thus, if profitability 3 out of 5 years presumes a business for
profit,
then it has to be applied to everyone that way unless some exception
is spelled out in the code, which there isn't.

Because there needn't be. Your premise doesn't describe real-life
litigation on this issue, nor does it reflect the practical effect of
Regulations under section 183.

Fred F.

C J Campbell wrote:

"TaxSrv" wrote in message
...

"C J Campbell" wrote:

...

I am not sure what you are claiming is a fabrication. Are you
saying that

Amazon.com and real estate tax shelters would not fail the 3 out of

5 test?

....

Pure summary, assuming all this is inappropriate for the NG. Hobby
loss rules do not apply to "C" corporations like Amazon or the
airlines. "Equal protection" arguments don't apply to noncriminal tax
issues, as Congress can allow a tax benefit, or deny a benefit, for
makers of widgets, but not gadgets. It can creep into tax-exempt org
issues, though. The practical aspects of real-life hobby loss issues
tend to render the 3/5 test moot. Recent developments in the shift of
burden of proof in Tax Court and reimbursement of representational
fees renders even the "rebuttable presumption" rather moot. IOW, it's
all a pure factual question, whether the losing, alleged business
passes the basic sniff test for hobbies.


Unless you are an IRS auditor, of course....

Formerly, but mere Auditor hell. :-) Many yrs in technical,
managerial, and training matters; civil and criminal litigation.


OK, I think we are on the same page, then. There is nothing preventing Ron
from setting up a "C" corp. Equal protection arguments do require that a law
or regulation be applied to everyone the same way. Thus, if profitability 3
out of 5 years presumes a business for profit, then it has to be applied to
everyone that way unless some exception is spelled out in the code, which
there isn't. Thus, the law can apply to widget makers or gadget makers, but
it applies equally to both unless Congress specifically says it applies only
to one or the other.

And my point is that the 3/5 test is irrelevant for almost all practical
purposes.

My own philosophy is: if there were no taxes would somebody do this as a
business? If yes, then the IRS is unlikely to have any problem with it,
either.

My main point is that neither Ron nor anybody else should base a business
decision simply on whether it passes some IRS rule which is probably
irrelevant anyway. You should make business decisions on the basis of
whether they are good business. If you do that then the IRS is nearly always
going to fall in line with what you want to do.

If you truly make good business decisions, then you'll likely make a
profit and won't have to worry about this issue! :-)

Matt