Lassoing Losses

A weekend rancher had a profit motive despite years of losses, the U.S. Tax Court ruled.

Business owners can generally deduct business losses on their tax returns, but if the related activity is deemed to be a hobby, the deduction is limited. To qualify as a bona fide business, a profit motive must be present, demonstrated by operating in a businesslike manner.

After reviewing the facts, the court said the rancher did have a profit motive and was permitted to deduct losses, but put him on notice that he needed to rein in future losses.