The case includes the following tax issues:
Issue 1: Is the determination of whether the blog is engaged in for-profit made at the partner or partnership level?
According to Madison Gas and Electric Company v. Commissioner (72 TC 521 (1974); aff'd 633 F. 2d 512 (7th Cir., 1980)), the determination of whether expenses are incurred in carrying on a trade or business is made at the partnership level. In Brannen v. Commissioner (722 F. 2d 695 (1984), aff'g 78 TC 471 (1984, CA-11)) and Goodwin v. Commissioner (75 TC 424 (1980) aff'd without published opinion 691 F.2d 490 (CA-3, 1982)), the courts examined whether the hobby loss rules applied to a partnership by applying Reg. Sec. 1.183-2 at the partnership level. Thus, Sweetness and Spice's activities should be reviewed to ascertain whether it is a trade or business or hobby.
If an activity does not generate profit...
