December 6, 2018
12/6/2018: I am out of the golf business. I was assessed a penalty of hundreds of thousands of dollars by the IRS. The IRS examiner determined that I was just having fun out on PGA tour and not really working, trying to sell my intellectual property. She had no direct evidence of such. This Federal ruling is not based upon a law or a regulation. It is based upon a long time IRS internal common ruling concerning their definition of a hobby. A hobby is one in which a person claiming a business expense has not been profitable in 3 years. I was not aware of this type of ruling, nor was I advised of such by my accountant.
My choice is to accept or fight. I could fight the federal government in their court. I was not likely to win. So, I reluctantly paid.
The IRS examiner would not accept the fact that my business was not selling golf equipment, but one of an inventor trying to establish worth for his intellectual property that would be attractive to a buyer. Although I had penetration on the PGA tour with my equipment and seven wins on tour, I was unable to attract a buyer. Therefore, the IRS has the authority to determine I was just having fun in golf, not working. Hence, the financial penalty.
To the contrary, it is evident that I am an inventor. I have 76 US patents starting in 1978 and issued regularly including one December 4th this year. For the record, only 41% of patent applications result in an US patent. Worse yet is that only 1% of US patents issued ever become commercialized and make any money. I have beaten those odds, as many of my patents have resulted in commercial value, however none in golf as yet.
One of the best business decisions one can make is to cut their losses. This arbitrary and capacious IRS ruling has helped me make that decision.