My research tended to support the fact that there was no exact definition of "engaged as a business"; however, my editor thought that someone, somewhere, must have assigned a definition, or at least a factor test, to "engaged as a business" or at least "business" generally. Your replies, at least, seem to validate my research and opinion.
Thank you for explaining the purpose of the question (cloud sourcing your research project) Well done.
These are both correct. There is not an exact definition. There is a factor test. (Referred to previously as facts and circumstances)
You noticed some of the factors in your last post there:
- Frequency
- For profit or not
- Incidental or routine
Other facts and circumstances for consideration:
- Does the time and effort put into the activity indicate an intention to make a profit?
- Does the taxpayer depend on income from the activity?
- If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
- Has the taxpayer changed methods of operation to improve profitability?
- Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
- Has the taxpayer made a profit in similar activities in the past?
- Does the activity make a profit in some years?
- Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
- Is the activity undertaken for commercial reasons?
- Is the purpose and is there a prospect of making a profit?
- Are the activities a regular and repetitive undertaking?
- Is the activity planned, organised and carried on in a business-like manner?
There is a huge body of case law in regards to what constitutes a business. Most of it is in the tax courts.
When a business gets downgraded to a hobby, you lose some tax benefits for loss carried. (Revenue is taxed regardless of classification)
I hope we get to see the result of your research posted when it is completed.