Dealing with sched C on very low acitivity home business.

I have a home business - business license, etc. but due to various issues - hurricane stuff, etc. just didn't do much with it last year. Incurred a few relatively minor expenses

- ebay fees, web domain registration fee, business checking account montly fees. Probably all amounts to less than $200. Didn't bring in a dime of income. Ended up using my "inventory" - CD's and cases, for personal use. I assume I need to file a schedule C since I did the previous year and need to show continuity. What do I do about the "material participation" question? Not sure, but I seem to fit the second test - I did all the activity that was related to the business, even though it wasn't much activity. I'm going to be getting a refund regardless, but I don't want to seem flaky having no income but deducting business expenses. I do plan to step things up in the near future so I don't want to discontinue the business. What would be the most hassle-free way to deal with schedule C? Thanks for all input.

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Reply to
Doc
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You should not be afraid to take a business loss if you had a legitimate loss -- that is perfectly acceptable. Luckily the IRS is not your boss and you don't have to constantly demonstrate gains... Gary Brolis

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Reply to
bbs

The correct way is to report all your income ($0), the product removed from inventory for personal use, and all your expenses. This will show a loss on Schedule C. The IRS allows you to have a loss as long as the expenses were legitimate and you are operating in a business-like manner (trying to make a profit). Since you plan to keep the business, you should file the Sch. C with a small loss and work to make a profit next year.

Reply to
bono9763

Sounds to me like you should file the Sch C just like you did last year. Just because you brought in no gross income doesn't mean you quit trying...ie, you do still have a profit motive. Mike Lewis, CPA

Reply to
James Lewis

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