hobby loss is not self-assessed. the IRS would have to audit and then "assert" hobby loss. thinks like projections that will show it will be profitable in the future. do you have a business plan? has the property appreciated?
for example rentals activities frequently show losses their entire existence. however, they would be profitable except for the required depreciation deductions. the property is worth at least the original cost so upon sale there will be a profit when all the years are considered.
Referencing the IRC Section 183, the key elements for deciding whether or not an activity is for-profit include:
The manner in which the activity is carried out or conducted –i.e., is it conducted in a businesslike manner?
The respective taxpayer’s qualification(s) concerning the activity.
The time spent on the activity.
The venture’s assets and their value appreciation potential.
The taxpayer’s history with the same or varying activity(ies).
The success or failure of the activity.
The amount of infrequent returns relative to losses and the taxpayer’s investment.
The financial status of the taxpayer – i.e., will the taxpayer benefit from the losses? What is their main source of income?
The taxpayer’s pleasure or recreation, resulting from the activity – i.e., does the taxpayer partake in the activity for pleasure?
