I always get sideways looks from people when I say this: turning a profit is not a bad thing. Yes, you’ll have to pay tax on that profit, and that stinks. And yes, of course you should deduct everything you possibly can. But when you show losses in a business venture, that means you spent more money than you brought in.
This post from 2011 is quite popular. It’s about a person in Minnesota who had a drag racing team which showed substantial losses each year. He took those losses as business deductions on his tax return, but the IRS and Tax Court said “no.” The moral is: if you say your “business” had $350 of […]
The hobby loss rules are important to know about, especially if you operate a side business.
How are authors taxed? For part-time or aspiring authors, it’s sometimes taxing.
What happens when a taxpayer files a tax return showing $0 of business income, offset by $58,000 of business expenses? They usually get audited. Especially when they have income from other sources of over $100,000. And if the taxpayer pursues the case to Tax Court, the Court usually sides with the IRS. Such was the […]
The U.S. Tax Court ruled Monday that a rental home that sits vacant for an extended period can still be considered a rental property. The case involved a taxpayer who had moved from Kansas City to Minneapolis in 1988. The taxpayer rented out their old home in K.C. until 2005. The home then sat vacant […]
The IRS has posted a video webinar for direct sellers to help determine if the seller meets the 9 tests under the Treasury Regulations for being in a trade or business. If you are wondering if you are a direct seller, here is what the IRS has to say: Direct sellers include any of the […]
A taxpayer from North Carolina had more than $15,000 in gambling expenses disallowed by the IRS after the taxpayer tried claiming the expenses as business deductions. The case went to Tax Court, and the Court sided with the IRS. The case shows that it’s hard to be classified as a “professional gambler” for tax purposes, […]
A Tax Court case ended poorly for a retired minister who tried claiming large business losses for a supposed business venture. The minister, a Reverend Ronald Faust, created something called “MacLeisure Creations” after his retirement. According to the Court report, “‘MacLeisure’ is a combination of Ronald Faust’s previous name, ‘Mac Keyes’, and the phrase ‘leisure […]
A taxpayer from Minnesota lost a Tax Court case earlier this month in which he tried to claim business deductions related to his drag racing team. The taxpayer, a Mr. Zenzen, reported business income of $850 in 2005; $950 in 2006 and $350 in 2007. This income was offset with expenses ranging from $25,000-$60,000 each […]