Are You Ready? Personal Prep for Season

[WhistlesAndStripes]

Originally Posted by Mark T. DeNucci, Sr.

The rules state that your business is to have a profit 2 out of every 5 years.

BUT!! In 1996 at the ABL officials tryout camp in Atlanta, I officiated 4 games with a fellow college official who was also an IRS agent from Washington, DC. I asked him about that rule. He said not to worry about it.

Before invoking that rule, the IRS looks at the type of business and his expenses, and the amount of gross revenue that it generates. His example was a person who is a stamp collector and who buys and sell stamps as a "hobby". If this person, on his Schedule C shows $15,000 in expenses (airplane travel expenses rather than automobile expenses) and only $500 in gross revenue every year, he will be subject to the requirement of a profit 2 out of every 5 years. But someone who officiates H.S. and small college athletics whose travel expenses are almost 100% automobile mileage deductions will get a pass if they lose money year after year because it is acknowledged that the mileage can easily wipe out actual gross revenue or come very close to wiping it out.

I can't remember the last time I had a taxable profit from officiating and umpiring, and I declare every penny I make (including game fees that are paid in cash) and only take legal deductions. If you don't have a taxable loss every year, you are not trying, .

And while I still have a taxable loss I still have a non-taxable profit, just like the multi-national corporations. Isn't America great!

MTD, Sr.

Per my previous post, it is actually 3 out of 5 years, not 2. Maybe it was 2 way back in 1996. Who knows.

I also don't like your stamp collecting example, as items such as stamps, coins, etc. are subject to capital gains rules and are reported in Schedule D, not E.

I also take issue with your statement that "The rules state that your business is to have a profit 2 out of every 5 years." The IRS can't tell you how often you HAVE To have a profit. All they can tell you is how often you have to have a profit IN ORDER TO BE ALLOWED TO DEDUCT YOUR LOSSES. Maybe I'm splitting hairs here and that is what you meant. And again I point out, the current rule is 3 out of 5 years.