Expenses for a writer with no income for the year

This is a very clear facts and circumstances issue. The is, as it usually is, "it depends"! In this case, it depends on how much income you have and the expenses being discussed. If you fill-in the pieces of the last sentence, someone may be able to assist you.

Dick

My understanding is that writers generally have to capitalize their expenses and depreciate them over the life of the book's income stream, or something like that. Is that at all accurate?

Stu

Let's say $20,000 expenses, travel, computer, books, etc. Zero income for the year. (Spouse works. have investment income.)

Sounds implausble on on a number of fronts .... I think there is a specific IRS ruling on this stuff.

I was thinking about this some more and your figure of $20,000 in expenses seems exorbinant to me. You'd need to be writing a best seller to recover that cost.

I do not prepare tax returns. Someone who does would have to answer this. The only way I see to deduct that amount of expenses is on a Schedule C, but you have no income. I wonder if you can do it against your wife's income.

Be aware that if audited, you are going to need one hell of a convincing story or one hell of a gullible auditor not to get this book classified as a hobby.

Also if audited, do not go to the audit rather have a CPA, an Enrolled Agent, or a Tax Attorney who specializes in audit representation go in your place

My child bride wrote a book, "Surnames for Women, a Decision-Making Guide" published by McFarland. She stills gets royalties because a Women's Studies Professor somewhere in Michigan copies pages from it for a course. The royalty payments are 'other income', not earned income, because it is the only book she ever wrote.

Dick

You're right. IRC Section 263A.

Stu

Oh I imagine there is such guidance from IRS somewhere. In fact our essteamed moderator may have researched this once. However, if IRS allows such expenses year to year before a book is published, they must be flooded with schedule c's with zero income from would be writers who don't get published, nor ever will be. If its' okay, then I'll start to work on my next book.

ChEAr$, Harlan Lunsford, EA n LA

(schnipped......!

And it will be a compendium of all Scottish whiskies with tasting notes on each and reports of visits to all the distilleries, both present and past sites.. Should take me about.... oh..... ten years to write it.

ChEAr$, Harlan Lunsford, EA n LA

Anyone familiar with the IRS rulings?

I think there is some sort of compromize and caveats written into the regs to avoid this. And to help out the many writers who sometimes take years to earn income from a particular project. Anyone familiar with this issue?

In 1988 Congress exempted authors and artists from the Unicap rules. See 26 USC 263A(h)

-- Rich Carreiro snipped-for-privacy@animato.arlington.ma.us

How about taking a look at this web site. Read all the cases and ask yourself, are you in business to make a profit? My choice of a book topic would of course be very interesting to me, but that is no guarantee that anybody else would be interested. Be realistic and assess your chances. Ask others' opinions, those who should know your field and can offer opinions. Then maybe post some more information here.

the web site is:

Sheesh, guys. How hard is it to look up Sec. 263A?

Actually I'm cheating because I used this very issue as a case study for a tax research class I taught for a CPA firm a couple of months ago. IRC Sec. 263A(h) provides an exception to the uniform capitalizaton (Unicap) rules for "qualified creative expenses." These are expenses that are "paid or incurred by an individual in the trade or business of such individual (other than as an employee) of being a writer, photographer, or artist," and that would be currently deductible were it not for the unicap rules. A "writer" is defined "as an individual whose personal efforts create (or may reasonably be expected to create) a literary manuscript, musical composition (including any accompanying words), or dance score." Oddly enough there are no regulatons under 263A(h); the section in the regs is "reserved." Guess they're still working on it. In the meantime, a free-lance writer should be able to deduct the expenses of researching and writing a book or other type of manuscript. Of course, the writer is in the same position as any other individual in having to show that his or her activities are engaged in for profit. The "hobby loss" rules of Reg. 1.183-2 would apply. Katie in San Diego

So then, if after three years working on my Scottish whisky book and I just give up, here are no reprecussions should I NOT publish?

Scotch ChEAr$, Harlan

Moderator: That's known as playing the Audit Lottery and I have a high degree of certainty that you would not do it.

umm, Harlan ... see Reg. 1.183-2. You'd still have to convince IRS (should the question arise) that your research was an activity engaged in for profit. Katie

To convince an auditor that you had a profit motive, it would be a good idea to have a publisher and a title for the book.

It's amazing what tax planning does for you!

Dick

Harlan, I can find you a publisher - as long as you agree to pay the printing costs. (They're not really vanity publishers - they actually do proper editing and have access to all distribution channels.) With that it might go a bit farther to convince the IRS. Stu

But of course, Katie. You know that; I know that, and Dick even knows that I know that.

But of course I could still publish, even on that web site which will print just one book at a time; no costly guaranteed press runs. I found it useful last year but published my book at cost, so there was no profit motive atall. Of course I didnt' deduct any expenses, either, since it was for family; meaning cousins all over the world. ChEAr$, Harlan

For a fee? (grin

Actually I have a publisher who takes my uploaded file and cover page, stores it, and print just one copy at a time for him who orders it online. See