Question

Which of the following is not relevant in determining whether an activity is profit-seeking or a hobby?

A) The taxpayer's expertise in the activity.
B) The history of income or losses with respect to the activity.
C) The taxpayer's occasional profits from the activity.
D) The manner in which the taxpayer carries on the activity.

Answer 1

The factor not relevant in determining if an activity is profit-seeking or a hobby is the taxpayer's occasional profits from the activity, as this can occur in both hobbies and businesses.

Step-by-step explanation:

The question asks which factor is not relevant in determining whether an activity is profit-seeking or a hobby for tax purposes. When evaluating an activity, the Internal Revenue Service (IRS) considers several factors. These typically include:

• The taxpayer's expertise in the activity.
• The history of income or losses with respect to the activity.
• The manner in which the taxpayer carries on the activity.

However, the taxpayer's occasional profits from the activity (Option C) is not by itself a definitive factor in determining the motive of the activity. Occasional profits may be seen in both hobbies and businesses. Therefore, the correctness and intent of the activity are determined by a combination of factors, and not just the presence of sporadic profits.