If you have losses for more than three years, it could trigger the Hobby Loss Rules. In order to not trigger Hobby Loss, you would have to show an aggresive pursuit of income. You are aggressively pursuing income if you are working more than 500 hours a year, your business is a legitamite business, and you are trying to make a profit.
Craig W. Smalley, E.A.
Admitted to Practice Before the Internal Revenue Service
How do I prove that I am working more than 500 hours a year? I actually work about 2500 now, it's like my second job. I've never been asked on my return how many hours a year I work for my business. I had a $14,000 loss last year but I made about $3,000 so maybe that was enough to show that we are trying? I'm worried that I won't be able to claim my expenses as they are extremely high given the industry that I am in. Thank you for your response!
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