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.
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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.