I wouldn't rule out just letting it go, but if Terry is up for it, it is reasonable to go for those losses. Robin has won some races and obtained some sponsorships, but losses continue. I don't know if that has something to do with how they met and I'm not going to ask. Terry, Robin's spouse is a racecar driver. Robin is a plastic surgeon making $700,000 per year. Sometimes considered a fourth factor and other times considered a reflection of the second is having a business plan. Note that it is actually three factors - record keeping, following the example of people who make money and making changes based on feedback. A change of operating methods, adoption of new techniques or abandonment of unprofitable methods in a manner consistent with an intent to improve profitability may also indicate a profit motive. Similarly, where an activity is carried on in a manner substantially similar to other activities of the same nature which are profitable, a profit motive may be indicated. The fact that the taxpayer carries on the activity in a businesslike manner and maintains complete and accurate books and records may indicate that the activity is engaged in for profit. (1) Manner in which the taxpayer carries on the activity. And it is the one factor that is most under your control: The big reveal of my second post is my conclusion that only one of the nine factors will either make you or break you. In the second post, I discuss the IRS regulation that interprets Section 183 agreeing with Judge Posner of the Seventh Circuit that the regulation is "goofy". In my first post I suggested that advisers are too conservative in discouraging clients from taking losses from legitimate side gigs.
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