In a recent case involving a long series of losses did not trigger the hobby loss disallowance rules.
The case of an artist had losses in 18 out of 20 years. Although she was a full-time art professor, while she spent a lot of time on her art career, creating 2,000 pieces of art over 40 years.
Some of her works hang in major museums. She acted in a businesslike manner despite the losses, keeping track of her inventory, hiring a gallery to market her art and going to networking events. Recognizing that it takes a long time to achieve success in the arts and that her losses were magnified partly by her claiming personal expenses, the Tax Court said that her art endeavors were not a hobby.
So the point to recognize is to keep running your business in a businesslike manner. Keep great records.
Crile, TC Memo. 2014-202