Hobby Loss Or Business Loss Tax Deduction
It’s not every day that a case comes through the Tax Court centered on the taxation of miniature donkey breeding. But the recent case of Huff v. Commissioner was focused on just that—specifically, whether the taxpayer (a breeder of miniature donkeys) could deduct expenses incurred in excess of income from the breeding activity. The Tax Court’s decision focuses on section 183, the so-called “hobby loss” provision. While taxpayers are generally entitled to deduct ordinary and necessary expenses necessary to conduct a trade or business or for the production of income, Section 183 of the Internal Revenue Code limits the ability to claim deductions arising from an activity that is not engaged in “for profit.”
Below is a summary of the recent decision.
William R. Huff and Cathy Markey Huff, v. Comm’r, T.C. Memorandum 2021-140| December 21, 2021 | Urda, J. | Dkt. No. 22604-17.
Short Summary: The main issue in this case is whether the taxpayers’ miniature donkey breeding activity was operated with the intent to make a profit under section I.R.C. 183 during the 2013-2014 period (the tax years).
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