This area stems from the fact that many people make profits from their hobbies. Person A begins selling some crafts that they've been making on eBay as a hobby. Person B likes knitting and decides to start selling his/her creations at the local senior center or community center. The IRS needed to address the question, at what point does a hobby where profits are collected become taxable? In response, the IRS published guidelines on determining if an activity is a hobby or a business. Here is what the IRS has ...
This solution explains how a business can be classified as a hobby for income tax purposes. Examples are also provided.