[Mark T. DeNucci, Sr.]

JJ: I have been submitting a Schedule C since the 1982 tax year. And while your accountant is legally correct about the IRS rules requiring a taxable profit at least two out of the last five years, the IRS does not follow its own rules to the letter of the "law."

For all of the Schedule C's that I have submitted, I have had only seven taxable profits. And yet to be audited over it. In 1996 at the ABL officiating tryouts, in Atlanta, I officiated with an IRS agent, and I asked him about the IRS rule you are talking about.

He told me that the IRS looks at the following items:

type of business (some businesses are travel intensive and generate large mileage deductions, such as sports officiating)

total gross receipts

If someone is generating only $500 in gross receipts and $5,000 in losses, that is a red flag. But if you are generating $15,000 in gross receipts and have a losses totaling $17,000 (including large mileage deductions and other travel deductions) every year, then you will not be bothered. They want to see a legitimate business not a sham business.