When confronting low-or-no-income operations, IRS seems to be claiming indocumentado in the SNOD, but raising both hobby loss (Section 183 goofy regulation) and Section 195 start-up in the runup to trial. Today Judge Ronald L. (“Ingenuity”) Buch lets it in.

Matthew M. Hutchings & Shari L. Hutchings, Docket No. 13321-20, filed 3/7/24, have been here before. See my blogpost “Expand Rule 51,” 12/22/23. Matt & Shari did substantiate most of their claimed expenses, although they flunked vehicle use (but is a Ford F350 really a passenger vehicle, Judge?) and some construction stuff.

But today they lose an off-the-bencher, and the facts are pretty nearly a walkover for IRS, even though Judge Ingenuity Buch gave IRS BoP on hobby loss and startup.

“Happy Eating [the Hutchings’ operation] did not have an official website or present itself to the general public. It did not have separate bank accounts, credit cards, or records. The supplies used to repair and maintain the property were purchased using the Hutchings’ personal credit cards. Furniture and services were purchased using the Hutchings’ personal credit cards. Creditors were paid using the Hutchings’ personal credit cards or with personal checks or wire transfers from the Hutchings’ personal bank accounts. The Hutchings did not treat Happy Eating as an active trade or business.” Transcript, at p. 14.

True, Shari ran a couple soft openings (hi, Judge Holmes) in year at issue and subsequent year, but these were market tests where she got reactions but no diñero; maybe she might have made money down the road, but she didn’t try in year at issue.

Matt’s & Shari’s trusty attorneys L&L did well to shift BoP, but the facts remain.

And remember, starters-up, get a bank account and a business credit card for the new venture off the bat. You maybe so can’t get a toaster from the bank anymore, but they could give you cash and you might could just save your deductions.