three-of-five test

Definition of "three-of-five test"
  1. An IRS criteria suggesting that if a business venture doesn't profit for three out of five consecutive years, it may be a hobby, not a business, influencing its tax implications, as businesses are eligible for tax benefits not available to hobbies
How to use "three-of-five test" in a sentence
  1. Using the three-of-five test, the IRS determined that the man's art selling venture was simply a hobby.
  2. The boutique owner needed her business to profit this year to pass the three-of-five test and maintain her tax benefits.
  3. The audit outcome relied heavily on the results of the three-of-five test.

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