@Terry53029  You know the origin of the "red flag" expression?  Back when paper returns were mailed to IRS district offices, those of IRS employees were literally "red flagged."  In recent years people who know nothing about IRS return processing but get paid to write something, often have used the "red flag" expression in relation to returns claiming office in home.  Not so much of that anymore, since it was taken away from employees.  But it's absurd (or maybe just wishful thinking)  to think that IRS computers are capable of analyzing one taxpayer over a period of three or four years, to sort out those with consecutive losses.  They're not able in many cases to do document matching for a single year.  

Much of the Internal Revenue Code is written in plain English.  Here is what Section 183(d) says.   Why someone turns it around to mean "IRS gets to presume it's a hobby unless you show a profit in three years," is beyond me.  

"If the gross income derived from an activity for 3 or more of the taxable years in the period of 5 consecutive taxable years which ends with the taxable year exceeds the deductions attributable to such activity (determined without regard to whether or not such activity is engaged in for profit), then, unless the Secretary establishes to the contrary, such activity shall be presumed for purposes of this chapter for such taxable year to be an activity engaged in for profit.