Worker Classification Issue Can Be Worse Than Disallowed Deductions

The poster child for IRS attacks on hobby losses is probably the horse breeding business.  I don’t exactly live in horse country, so most of what I have learned about the business has been from reading Tax Court decisions.  There is a serious sampling problem in making inferences from that material, but nonetheless I have made them.  My inferences are that it is very hard to make money in that business, it only seems like it is fun if you don’t think about it too much and there is a lot that can go wrong.  My limited actual experience in 30 years of general tax practice has not contradicted those inferences.  Nonetheless, horse breeders do pretty well in Tax Court when challenged under Section 183 (hobby loss) – a lot better than Amway IBOs for example.

http://www.forbes.com/sites/peterjreilly/2012/07/06/worker-classification-issue-can-be-worse-than-disallowed-deductions/