In Wayne Lasier Wilmot (T.C. Memo. 2011-293) the IRS denied the taxpayer losses related to his photography business, asserting it was a not-for-profit activity (i.e., a hobby).
The taxpayer had a full-time job as an oceanographer working for NOAA. He took college courses in photography and hoped to pursue advertising and commercial photography. He traveled to Europe to take photos using models to build a portfolio. On his 2004 tax return he claimed expenses of $57,691 on Schedule C. He showed no income from the activity. Expenses included legal and professional of some $12,836, office for $11,048, supplies for $10,204, and travel for $20,949.
The taxpayer had detailed records of his expenses, but, as the Tax Court noted, it appeared the records were kept for securing a tax deduction rather than for business purposes and he had no written business plan.
The Court examined the nine factors used to determine whether an activity is engaged in with a profit objective. The Court noted the taxpayer did not advertise, and even turned down some work that he thought undesirable. Even the factor that is based on the taxpayer's success in carrying on other similar or dissimilar activities were of no help to the taxpayer. The Court noted that the skills he developed in his success in an oceanographic consulting business were not readily transferable to a photography activity. The Court weighed the factors and sided with the IRS in denying the Schedule C losses.
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