Deduction for Death Investigation Denied as “Hobby Loss”

WealthManagement.com
Oct 17, 2017

Martin M. Shenkman 

An estate is generally permitted a tax deduction for costs incurred with respect to
the production or collection of income. However, the primary reason for having
incurred those costs must have been to generate profit.

In a recent case, the U.S. Court of Appeals for the Fifth Circuit affirmed the Tax
Court’s holding that a taxpayer couldn’t deduct the costs of investigating his father’s
death from his father’s estate because the investigation wasn’t motivated by profit
(Vest v. Commissioner, (CA 5 June 2, 2017) 119 AFTR 2d par. 2017-813). But did the
Internal Revenue Service have to label them a “hobby loss?”

Read his commentary here.