In a recent unpublished opinion, the Eighth Circuit looked at a hobby loss case, Montagne v. Commissioner. One of the points we continually make is to document, document, document. The Montagnes had a horse-breeding “business,” but the Tax Court ruled that it was a hobby. The Eighth Circuit noted that there was no financial projections or business plan, and that they co-mingled their business and personal expenses (one bank account). So if you’re going to have a business, treat it that way: maintain separate records and a separate bank account.
Case: Montagne v. Commissioner, 04-4137