I have spent many hours on this very subject, I unfortunately have spent more hours sniffing kerosene so the mind is a little fuzzy. if you are serious PM me and i will tell you a mans name and number who used to be an IRS Auditor who specialized in fraudulant deductions and you can pay him (as he is now a consultant working on our side) and hear it from his point of veiw. I asked my a full time attorney and CPA as well as this Ex-IRS man , they all tell me the same
thing. If you can prove your rocket powrered funny car or Nitro burning luge is a business with the expectation to earn a profit, board meetings with minutes, receipts etc. all the stuff you would expect to see in any legit business, then you are "not for Hobby" the 'hobby clause" states "resonable expetation", which defined means "gray area" p*ss the auditor off and the gray area bends his way, see what i mean. As for audits , the IRS is out numbered and I bet they don't chase nickels, so as a gambling man I bend the gray area my way, "BUT" and I qualify this entire posting with a "BUT" I dont' have cable tv and the federal prision system does.