Discussion:Disallow a loss?
From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
(Difference between revisions)
| Revision as of 15:01, 20 October 2008 Death&Taxes (Talk | contribs) ("when you reccom) ← Previous diff |
Revision as of 02:05, 21 October 2008 Cporter1 (Talk | contribs) (The client is an) Next diff → |
||
| Line 19: | Line 19: | ||
| }} | }} | ||
| + | |||
| + | {{ForumReplyPost|UserID=Cporter1|Date=21 October 2008|Text=The client is an employee and is starting a business on the side. Her salary more than covers her living expenses. I would probably not normally reccomend that someone show a profit when they actually had a loss but since she has recently filed several late returns and had received several IRS letters (included 90-day letter) I just didn't want her to have any additional red flags on her return. | ||
| + | |||
| + | I appreciate the responses.}} | ||
Revision as of 02:05, 21 October 2008
Discussion Forum Index --> Basic Tax Questions --> Disallow a loss?
Discussion Forum Index --> Tax Questions --> Disallow a loss?
| 20 October 2008 | |
| I just wanted to know if there comes a point when you stop allowing a client to take a loss. I have a client who is coming up on her 3rd year of small business losses. I know the IRS wants someone to show a gain in 3 of the last five years so as to not be recategorized as a hobby but I also know they take other factors into consideration. Does there come a point when you reccomend to a client taking away a few business deductions so as to not show a loss? When you you get to that point? | |
| 20 October 2008 | |
| What is the client using for living expenses?
Another source of income? Borrowing from family? Savings? | |
Death&Taxes (talk|edits) said: | 20 October 2008 |
| "when you reccomend to a client taking away a few business deductions so as to not show a loss?" No way! Either the person spent the money, and can account for the source, as Kevin notes, or made the numbers up, in which case you do not listen. If the money was spent, you must then weigh Sec. 183 but for Pete's sake, if we followed IRS' line of thought, I suspect many successful ideas would have never seen light of day. You have to weigh the factors that are contained in Reg. 1.183-2(b) or for a more practical explanation, read http://www.writing.com/main/view_item/item_id/328910
I have many clients in the field of arts where this is the case, and then I think of John Kennedy Toole. Sometimes I think Toole took his life because his tax person thought his activities were a hobby loss. http://www.writing.com/main/view_item/item_id/508275 Forgive the self-promotion, but I am trying to convince my tax guy that my writing activity is serious. | |
| 21 October 2008 | |
| The client is an employee and is starting a business on the side. Her salary more than covers her living expenses. I would probably not normally reccomend that someone show a profit when they actually had a loss but since she has recently filed several late returns and had received several IRS letters (included 90-day letter) I just didn't want her to have any additional red flags on her return.
I appreciate the responses. | |
