The IRS knows very well that in the first few years of a business it is common to operate at a substantial loss and make large write-offs. However, if you consistently lose money over a period of years, the IRS can accuse you of operating a hobby as a business and can disallow the deductions. To build evidence in your favor, you might want to consider doing the following things: participate in car shows, car auctions, automobile clubs, generate promotions with your automobile (if it is an exotic or classic car unless you are using public transportation to and from work). It is also very good to prepare a business or investment budget.

Let's first look at the investment approach. This is perfect for antique, classic, exotic cars, specialty cars, street rods and restorations. This approach is your best option if your automobile transactions are performed only once or a few times a year.

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