but I was also asked questions on and off the board also. I gave 'opinions' clearly stating that you may have different 'first hand' experiences and that tax inspectors can vary

Here is a summary of where we got to for you to think about:

1. At what point does a hobby become a business.
Will Knight just posted a link further down to the IRS page on the matter. I had pointed out that tax inspectors may look a bit further than the paper records put in front of them. ie If you state that its your only source of income and you live in a grand house with a few new cars around they will probably delve a bit deeper On the other hand if you live in a wooden shed you may get away with it!

2. At what point can you start claiming outlays to offset any 'profits'

FYI this is how they treat it over here: You have an annual 'capital allowance'. This is an amount you can make each year from sources other than your main income without paying tax. It is completely separate from income tax allowances and is not transferable to such (which equates to the not being able to offset losses). The allowance covers a variety of things from profit made on the sale of property that was not your main residence to profit made from hobbies.

You are allowed to carry forward any unused capital allowance for an indefinite period.

eg I buy a collection of chips for $50k in 1994 and sell for $100k in 2004. Retail price index shows the $50k is worth $70k now. I have an unused allowance of $2k a year for the past 10 years. I pay tax on the balance of $10k.

I have tried with and without success to claim various things on behalf of clients. Selling a 'hobby' collection through an auction house means its okay to deduct all the costs of selling as you only receive the net proceeds. Setting up the auction/sale yourself is not. The original cost of going to a foreign country to acquire the collection is debatable and will get different views from different inspectors. The interest you paid on the loan you took out to buy the collection is 'tough luck' If you were doing it as a business you could claim both these and claim some of the personal part against the capital allowance. You could end up paying less tax as a business than as a hobby.