A side business is a business and not a hobby, according to the tax court. This is good news for an attorney by day and part time filmmaker by night. The documentary film activity is engaged in for profit, despite the large losses incurred in the six years it took to produce and market her first project.
Her primary source of income was as a lawyer, while spending nights and weekends on the film. She had a business plan, bought insurance, hired accounting help and actively marketed the documentary.
Other changes she made to increase the film’s profit potential, such as changing the name of the documentary and getting a new editor. She also had a theater background, took film production classes and consulted several experts. Her losses are deductible because she acted in a businesslike manner.
(Storey, TC Memo. 2012-115).