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Simple English definitions for legal terms

three-of-five test

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A quick definition of three-of-five test:

Three-of-five test: The three-of-five test is a rule made by the IRS that says if a business doesn't make a profit for three out of five years, it's not a real business but just a hobby. This means that any money lost from the hobby cannot be used to lower the amount of taxes owed. Instead, the hobby expenses can only be claimed as itemized deductions on a tax form.

A more thorough explanation:

The three-of-five test is a rule used by the Internal Revenue Service (IRS) to determine whether a business venture is a hobby or a legitimate business. According to this rule, if a business venture does not make a profit for three out of the last five consecutive years, it is considered a hobby and not a business for tax purposes.

For example, if a person starts a small business selling handmade crafts and does not make a profit for three out of the last five years, the IRS may consider it a hobby rather than a legitimate business. This means that any losses incurred by the business cannot be used to offset other income.

Another example could be a person who invests in rental properties but does not make a profit for three out of the last five years. The IRS may consider this a hobby rather than a legitimate business, and any losses incurred cannot be used to offset other income.

The three-of-five test is a rebuttable presumption, which means that the taxpayer can provide evidence to prove that the business is a legitimate business and not a hobby. However, it is important to keep accurate records and demonstrate a profit motive to avoid being classified as a hobby by the IRS.

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11:07
all serial killers drank milk as childs
11:08
children*
11:08
whoore*
BulbasaurNoLikeCardio
11:08
@LSDFan: They call it operator syndrome now at the VA
LSDFan
11:09
lol
11:09
I thought it was door kicker syndrome from all the breaching
Dkk
11:09
Ahh childhood, what a sweet sexual time of discovery. Takes me back.
BulbasaurNoLikeCardio
11:09
Who knew firing thousands of rounds and being next to explosions was bad for our brains
11:09
It is almost like the people doing that used to die fast
11:10
Didnt plan on anyone living long enough lol
11:10
I long to die on a european battlefield
11:10
thats the true white mans burden
11:10
calm down mostly putin
babycat
11:10
yeah fuck gtown btw
LSDFan
11:10
they don't even kick doors. They put C4 in a dip can and tape it to the wall
11:10
I am sure they kick some doors but yes
11:11
@EvolBunny: im a uki
babycat
11:11
terrible admin
BulbasaurNoLikeCardio
11:11
@babycat: I wonder why gtown felt what they said was a good idea and how secure that individual felt in their job to believe there would be no backlash.
Dkk
11:11
please, tell me more about Europa: The Last Battle @MostlyLegal
11:11
nothing you dont already know
Dkk
11:12
Lmfao, damn out of messages again. Time to go sit in the hot tub.
11:12
@BulbasaurNoLikeCardio: honestly fuck these schools
11:12
The way they act is so cringe and gives mad ick
babycat
11:12
@BulbasaurNoLikeCardio: people are saying this has been a pattern with them
babycat
11:12
imagine being a religious school and not supporting mothers. practice what you preach!
11:12
Fuck dem hoes
11:13
Child bearing people*
11:13
i cant spell fuck dont correct me
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