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Originally Posted by bob jenkins
I agree, and I think (but I am not a tax expert, nor did I stay in a HolidayInn Express last night) that you need to occasionally (something along the order of 1 in three years) declare a profit or the IRS might / will decide that this is a hobby and not a business.
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Bob:
I think the correct ruling is that a Schedule C business must show a profit two out of the last five years. BUT, that is not how the IRS applies the rule. Back in 1996, at the ABL officiating tryout camp, I officiated with an IRS Agent who worked in the IRS's Headquarters in Washington, D.C. He told me that the IRS looks at the type of buiness and the amount of gross income is being generated.
As example, a person is a stamp collector and travels to stamp shows every weekend to attend stamp shows. The stamp collector trades and sell stamps at these shows. Every year the stamp collector shows gross income between $300 and $500, but shows a taxable loss every ear in excess of ten times his gross income. That would bring out the
red flags. The IRS would consider this a hobby and not a business.
Officiating of amatuer sports is a travel intensive buiness and the IRS understands that. I have had a few years when I have had a taxable profit, but more often that not I have a taxable loss and I have been filing Schedule C's for over 25 years.
MTD, Sr.