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This post addresses federal taxation issues.

A Business Made Possible by eBay. Please respond to the following:
- Evaluate whether or not Ted's activities are a business or a hobby and state how you would know or what you would ask Ted.
- Evaluate on a scale of 1-3, with one being ethical and three being highly unethical, Ted's actions from the perspective of the IRS.

Tax Treatment of Damages Not Related to Physical Personal Injury. Please respond to the following:
- Take a position on the following statement and defend your position with evidence and / or examples: Damages awarded for a physical personal injury or sickness should be treated more favorably than damages awarded for emotional distress or other nonphysical personal injuries.

Solution Preview

Evaluate whether or not Ted's activities are a business or a hobby and state how you would know or what you would ask Ted.

-- Even though Ted's intentions may be pure in offering the products to others, Ted's activities generate a profit. He buys an item for $40 and sells it for $70. He doesn't buy it for $40 and sell it for $40, in which case we could argue that he doesn't intend to make a profit. Ted has therefore failed the main test of determining if an activity is a hobby or a business. Things that we could further ask Ted might be whether he depends on the profit generated from the activity for daily living expenses. We could also ask Ted if he has changed any methods of operations to further increase his profitability, which ...

Solution Summary

The solution provides a detailed explanation determining if Ted's activities are a business or hobby. The solution also explains if the damages awarded for physical injury or sickness hould be treated more favorably than damages awarded for emotional distress or other nonphysical personal injuries.

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