Hobby income isn't reported on Schedule C, it's somewhere else on the main 1040 I think. Schedule C is for self-employment income, or pass-through entities like LLC's in which you're the only owner or member.
I think the thing about hobby income is that they want to make sure that you can't get out of paying your income taxes by spending money on an expensive hobby and then calling it a business loss. Think of it like this: Say Uncle Scrooge makes $500k/year at his regular job. He likes boats, and occasionally takes tourists out on his fancy boat for a couple hundred bucks here and there. So he makes $1000 by taking a group of tourists out for an evening excursion, and calls it a boat tour business. Then he buys a new boat for $450k and tells the IRS that his boat tour business lost $449k this year, making his overall taxable income $51k. Obviously he would rather pay taxes on $51k than on $501k.
But the IRS says not so fast buster, your boat tours are a hobby and you can't claim that you only made $51k this year just because you spent $450k on a yacht.
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