HOBBY SHOP INHERITED BY ART TEACHER WAS A BUSINESS, NOT JUST A HOBBY
The U.S. Tax Court has held that a model airplane store that an art teacher inherited from her father was a trade or business, not a hobby. The art teacher taught in Nevada and owned and managed the shop, which was in Idaho. The Court found that she had a profit motive and that the business activity was not just for recreational purposes. The distinction is important. If an activity is classified as a business, then expenses can be deducted without limitation on Schedule C of a taxpayer’s individual return. If the activity is considered a hobby, expenses can only be used to offset income from the hobby. To read the opinion, see Savello, TC Memo 2015-24.