Hobby/Business Evaluation

Couriers and newpaper deliverers almost always showlosses and I've never had a problem with that. That's probably a case where the business code on the Sch C gets them a "free ride."

=========

So where are you on the EA SEE?

had a client years ago who delivered papers and, after preparing a Schedule C showing maybe $1,000 profit, asked him if he thought it was worth it (getting up at 3:00 a.m., etc.)--he enthusiastically replied that it was a GREAT job--I guess that little Honda didn't cost much to operate.

text -

Do artists and writers -- who are independent contractors -- have to show a profit three out of five years, too? I thought they had some sort of exclusion or special partof the IRC.

text -

No one has to show a profit 3 out of 5 years. All that test does is determine who has the burden of proof if the IRS audits a taxpayer on that issue.

I am not aware of any different x out of y years test for determining where the burden of proof lies when the taxpayer is a self-employed artist or writer.

There might be special rules for showing a profit, but I'm not aware of that. There certainly are for horse racing.

But pleae understand that the 3 of 5 "rule" is not denying your business motive and disallowing all deductions.

It is a method to shift the burden of proof from the IRS having to prove no profit motive to you having to prove that profit motive and a plan to get there.

And some businesses naturally can attract attention and be scrutinized, such as photography, dog breeding and car racing, while others can be losing money year after year after year and not attract IRS attention, such as a courier or trash hauling or tax preparation :^)

" snipped-for-privacy@gmail.com" wrote

Artists, writers, performing artists, etc all have the same rules in regards to proving the activity is a business with a profit motive.

There's no requirement to show a profit in any year, but the burden to prove there is a motive for a profit falls to the artist.

Maybe you are thinking of the exception to UNICAP rules for artists, writers, photographers when calculating their cost of goods sold.

-Mark Bole