I have season tickets to a major sports club. I sell a significant amount of these tickets (~75%) on 3rd party websites, like Stubhub, and to various friends and family. The selling of tickets does not take up a significant amount of my time. I do not treat it like a business. The profits are not a significant portion of my income. And I am certainly no expert in ticket sales. Based on these facts, I have been taking the position that this is a hobby and reporting the gross sales on schedule 1 (I also report the cost of the tickets as a deduction on schedule 1).
The past 3 years, my gross profit has been roughly $10-15k. I worry that under the IRS rule that having profits at least 3 of the past 5 consecutive years qualifies the hobby as a business and the IRS would tell me I need to report this all on Schedule C. I would argue that if I were to be treating the hobby as a business, I would be deducting many more expenses and would actually have a net loss. Let's assume I would actually have enough deductible expenses to make that statement true. Does my argument hold water?
Tax Pros, would you consider my hobby to be a business? Season Ticket Sales
byu/thedogmumbler intax
Posted by thedogmumbler
5 Comments
Your position isn’t reasonable. You are engaging in the act of the resale of tickets for profit. This could be a hobby if you were selling a lower percentage of the tickets, but 75% is a pretty high number
While you can claim more expenses on Schedule C, what expenses do you actually have that are directly related to the resale activity other than platform fees and COGS?
No not really. This very much sounds like a business. It doesn’t matter if the profits are a significant amount of your income or not. You also don’t need to be an expert to have a business in a given field.
You do this every year consistently and sell a significant amount of your inventory that you purchase. This type of business doesn’t typically have costs other than what you’ve already described. So overall it sounds like a business.
You could argue Schedule D; capital gains and losses. Showing the purchase price & date then the sales price & date minus any platform fees. That difference is your taxable gain.
>I would argue that if I were to be treating the hobby as a business, I would be deducting many more expenses
Such as?
>and would actually have a net loss.
Highly doubtful.
>Let’s assume I would actually have enough deductible expenses to make that statement true. Does my argument hold water?
Probably not.
That said, I’m genuinely curious.. if you were truly losing money by selling the tickets, would you:
A. Stop buying and selling them.
B. Try to improve your process to become profitable, and then if that fails
(1) stop buying and selling them, OR
(2) continue buying and selling them, because:
(a) losing money is just the cost of enjoying selling tickets.
(b) the alternative is losing more buying and throwing 75% away
(c) Both B(1)(a) and B(1)(b)
(3) continue buying but stop selling.
(4) stop buying, but still try to sell what you already have.
C. Not care.
D. Something else.
It sounds like you are in the business of reselling tickets. How much you earn from that business isn’t really relevant.
Outside the cost of the tickets, the listing fee, and potentially shipping, what other costs do you have that would lead to a loss?
Expertise is not required in a subject for it to be considered a business. Look at many tax offices, for example.