In Determining Whether an Activity Should Be Classified as a Hobby

In determining whether an activity should be classified as a hobby, the tax law provides a rebuttable presumption with regard to the profits or losses of an activity. Which of the following statements describes the profit/loss test which must be satisfied in order to meet the presumption that the activity is not a hobby?

A) The activity shows a profit for 3 of the 5 previous years.
B) The activity shows a loss for 3 of the 5 previous years.
C) The activity shows a profit for 3 of the 7 previous years.
D) The activity shows a loss for 3 of the 7 previous years.
E) None of these

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