Online Home Based Business Education (scam?)

"mammondee" wrote

Going strictly by her intent, it looks like a Schedule C loss, only for the expenses paid in 2010. Any 2011 expenses will have to go on a 2011 return.

The only way to stop the drafts is to close that account.

to pay for the expertise of advisers at a company we will call P.I.

sell cookware and become the middle man. She would set up a website to offer the goods for sale. The customer would order from her and she would have the items drop shipped directly from her suppliers to the customer.

this. She talked with her "coach" one hour a week for six weeks over the telephone. She was given homework to do, such as looking up "drop shipping" and researching it. She was provided a set of books to use.

They kept telling her they could do more for her if she would "pay" more. For example, she could pay to have their attorneys help her devise lines of credit for her customers.

2010, but P.I. continues to draft $250 a month until the remaining $3K is paid off. She says the bank can not stop the draft.

on and is no longer pursuing this venture.

subject to 2% AGI, an itemized deduction not subject to 2% AGI, or not deductible at all.

3K in 2011 or the entire 13K in 2010.

If she is not pursuing the venture, just what business do you think she's in? Start-up costs for businesses that never opened their doors aren't deductible at all.

True. Might it be a casualty loss subject to 10% + $500 of your AGI? That is, if your AGI is 50,000 then the amount lost in excess of

5,500, which equals 7,500 is deductible on Schedule A.

But this means filing a police report and getting the courts to recognize that this was theft, and that there is no way to sue to get your money back.

Just a thought.

Operating under the assumption that P.I. is a legitimate business, there still is a possibility of a deduction. Startup costs can be divided into three parts.

1. Costs incurred to investigate starting up a business: Not deductible unless you actually commence operations. They are considered nondeductible personal costs.
2. Costs you incur attempting to start the business are treated as capital expenses and can be taken as a loss on Schedule D if the business never commences operation.
3. Any loss on the sale of business assets that were purchased as part of trying to startup can be deducted as a capital loss if the business never commences operation and the assets are disposed of.

I leave it to others to make the determination as to when investigative costs stopped and costs to actually start up began as this is based on all the facts and circumstances.