While Dogs Against Romney Are Rooting For Rafalca I’m Studying Hobby Loss Cases

Rafalca, the dancing horse owned by partnership Rob Rom Enterprises, which is owned in part part by the Romneys has brought the “hobby loss rules” (Section 183 – Activities not engaged in for profit) back in the news.  The Romneys had a $77,000 deduction flow through from Rob Rom on their 2010 return.  Only $50 of the loss went into the computation of taxable income, but that was not because of Section 183.  It was due to Section 469, the passive activity loss rules.  If the IRS wanted to challenge the deduction, they would most likely have to audit Rob Rom rather than the Romneys, because the 183 determination is made at the partnership level.  This had some commentators confused, but I believe that I and my esteemed editor have straightened it all out in our posts on the subject.

http://www.forbes.com/sites/peterjreilly/2012/07/28/while-dogs-against-romney-are-rooting-for-rafalca-im-studying-hobby-loss-cases/