In 2024 I have a client that formed a California LLC with 4 other persons to put on a festival in a town. Each person put in $50,000. It is a 2 day festival. The LLC will be cancelled once the festival is done. This article is making me think - because this is something this person has NEVER done before (he has 2 other businesses totally unrelated) and it is only for 2 days - this is not a business with continuity or regularity. Would this business be considered an activiy engaged for profit instead of a trade or business even though it is an LLC beiing taxed as partnership? and not subject to SE? OR what if they have a big LOSS can it be deducted? Being a partnership could the IRS classify it as an activity engaged in for profit and not a trade or business? Would love people's thoughts on this??
Great analysis very helpful
In 2024 I have a client that formed a California LLC with 4 other persons to put on a festival in a town. Each person put in $50,000. It is a 2 day festival. The LLC will be cancelled once the festival is done. This article is making me think - because this is something this person has NEVER done before (he has 2 other businesses totally unrelated) and it is only for 2 days - this is not a business with continuity or regularity. Would this business be considered an activiy engaged for profit instead of a trade or business even though it is an LLC beiing taxed as partnership? and not subject to SE? OR what if they have a big LOSS can it be deducted? Being a partnership could the IRS classify it as an activity engaged in for profit and not a trade or business? Would love people's thoughts on this??