Benefits Of A Non Corporate Taxpayer

1862 WordsJul 25, 20158 Pages
Expenses attributable to profit-seeking farm activities are deductible as either business expenses under IRC § 162 or production of income expenses under Section § 212. Under IRC § 162, ordinary and necessary expenses paid or incurred in connection with a trade or business are allowable as business expenses. Under IRC § 212, ordinary and necessary expenses paid or incurred in connection with the production of income, or the management, conservation or maintenance of property held for the production of income are allowable business expenses. Farm expenses that satisfy the requirements under IRC § 162 or 212 are allowable without regard to the amount of income derived from farming activity, subject to the risk rules, the passive activity loss rules and any other applicable limitations. If a non-corporate taxpayer engages in an activity without a profit motive, the activity is considered a hobby subject to the hobby loss rules. The hobby loss rules under IRC § 183 limit the deductibility of certain items with respect to an activity that is not engaged in for profit. The history of IRC § 183 indicates that one of the primary motivating factors behind its passage was Congress’ desire to create an objective standard to determine whether a taxpayer was carrying on a business for the purpose of realizing a profit or was instead merely attempting to create and utilize losses to offset other income (Nickerson vs Comm, 1983). Congress recognized that “wealthy individuals have invested
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