Nolo's Plain-English Law Dictionary

Legal Dictionary Home

Need Professional Help? Talk to a Lawyer

Enter Your Zip Code to Connect with a Lawyer Serving Your Area

searchbox small
Three-Of-Five Test
A rebuttable IRS presumption that a business venture that does not make a profit in three out of five consecutive years of operation is a hobby and not a business for tax purposes. Not meeting this test has significant tax consequences because businesses can take advantage of many tax benefits and advantages that hobbies do not get.
LA-NOLO1:DRU.1.6.2.20140813.27175