Submitted By: someone
Answered: August 27, 2020 10:41 pm

How many years can a business lose money and still file a Schedule C?

A business that loses money year after year may draw the attention of the IRS; it may question whether this is a business with a profit motive or a mere hobby activity for which losses (expenses in excess of income) are not deductible. There’s no fixed limit on the number of years of losses. However, a business that’s just starting up can elect to rely on a presumption that the activity is for profit (not a hobby). If such business is profitable in three out of five years, it’s presumed to be for profit (a different presumption applies to horse-related activities). But even if the presumption isn’t met, facts and circumstances can be used to demonstrate a profit motive.

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Tax Glossary

Basis

Generally, the amount paid for property. You need to know your basis to figure gain or loss on a sale.

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