An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses). If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
To enter amounts for Activities Not Engaged in for Profit, from the main menu of the 1040 return select:
- Income
- Other Income (W2-G, 2555)
- Activities Not Engaged in for Profit
Additional Information:
Know the difference between a hobby and a business
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