When a Nightclub is Not a Business

Under Code §183(b), a taxpayer’s activity that is not engaged in for profit gives rise to deductions only to the extent of income. No excess deductions arise that can be used to offset other income, and no net operating losses are produced.

Joy Ford, a country music recording artist and promoter, owned and operating the Bell Cove Club, a lakeside music venue in Hendersonville, Tennessee. The club featured live country music on Friday and Saturday nights. Joy devoted most of her time to the club and paid all of its expenses. The club charged a $5 admission fee and a nominal amount for snacks and beverages.

The club operated at a loss, reporting losses in 2012-14 of $39,285, $74,120, and $96,893. Joy used the losses to offset other income she had. The club’s recordkeeping was atrocious. . .

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