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<p>[QUOTE=&quot;NorthKorea, post: 1972553, member: 29643&quot;]Obviously you&#039;re joking.</p><p><br /></p><p>As for the 2/5, 3/7 rathbun cited, that actually is law for state tax purposes in Hawaii. If you fail to show revenue in two of the trailing five years, your GE license gets suspended. In Hawaii, you need a GE license for EVERYTHING, since we get taxed on everything.</p><p><br /></p><p>As for the IRS, this is from their website:</p><p><br /></p><p>&quot;The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.</p><p><br /></p><p>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.</p><p><br /></p><p>Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). These deductions must be taken in the following order and only to the extent stated in each of three categories:</p><p><br /></p><ul> <li>Deductions that a taxpayer may take for personal as well as business activities, such as home mortgage interest and taxes, may be taken in full.</li> <li>Deductions that don’t result in an adjustment to basis, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.</li> <li>Business deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.&quot;</li> </ul><p><br /></p><p><a href="http://www.irs.gov/uac/Business-or-Hobby%3F-Answer-Has-Implications-for-Deductions" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://www.irs.gov/uac/Business-or-Hobby%3F-Answer-Has-Implications-for-Deductions" rel="nofollow">http://www.irs.gov/uac/Business-or-Hobby?-Answer-Has-Implications-for-Deductions</a>[/QUOTE]</p><p><br /></p>

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