hobby loss rule

Definition

A rule established by the Internal Revenue Code for determining whether a taxpayer is engaged in a legitimate business activity for purposes of generating a profit. Activities that don't generate a profit in at least three of five tax years, or are not expected to produce profits in future years may be deemed as a hobby and, therefore, ineligible for certain business tax deductions. The rule does allow for certain hobby expenses to be included in personal itemized deductions.
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hoarding hockey stick