Trade or Business

The term “trade or business” has several different meanings depending upon the statute that is using the term.

For purposes of deducting business expenses under Section 162 of the Internal Revenue Code, a taxpayer is engaged in a trade or business if the taxpayer is “involved in the activity with continuity and regularity” and the taxpayer’s “primary purpose for engaging in the activity is for income or profit.”

A sporadic activity, a hobby, or an amusement does not qualify as a trade or business.

Source: Commissioner v. Groetzinger, 480 U.S. 23 (1987)
Last reviewed: September 15, 2013