Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.1 9/27/83; site saturn.UUCP Path: utzoo!watmath!clyde!burl!ulysses!harpo!seismo!hao!hplabs!saturn!johnson From: johnson@saturn.UUCP (Mark Scott Johnson) Newsgroups: net.taxes Subject: Re: Employee and A Business Owner Message-ID: <1933@saturn.UUCP> Date: Thu, 2-Feb-84 15:24:16 EST Article-I.D.: saturn.1933 Posted: Thu Feb 2 15:24:16 1984 Date-Received: Wed, 8-Feb-84 03:39:22 EST Organization: Hewlett Packard Labs, Palo Alto CA Lines: 31 Yes, business losses can be used to offset other income (even employee salary when the business is only part-time). Of course, the IRS takes a dim view of ANY losses, especially those that offset other gains. If your business is profitable, the IRS is unlikely to ever question its legitimacy. Also, if it's profitable for three (or is it two?) out of five years, they'll assume it is legitimate. If it doesn't meet this test, then you're most likely to have the losses questioned. There are no hard-and- fast criteria for what makes a business legitmate, but the business must be conducted in a "business-like manner" (proper accounting techniques, licenses if required in your area or trade, etc.), the intent must be to make a profit (are you investing a reasonable amount of time to the business?), and you must be qualified to conduct the business (hanging out a shingle as a "medical consultant" when you don't have an MD is not a good idea). If the business seem legitimate, there is no limit on how long it shows a loss or on how big the loss can be and still be deductible. The IRS is mainly interested in catching people you are trying to pawn off their hobbies as businesses. So if what you're doing looks like a hobby (how many people actually make money collecting stamps or taking photographs?), you run the greatest risk of being audited. If you ARE trying to deduct a hobby, I suggest you try making it deductible as a charitable contribution. If you like flying your plane, see if there is some orphanage in Mexico that needs supplies brought down. If you like fishing, donate your catch to a soup line. You can't deduct ALL your expenses, but you can deduct operating expenses and other out-of-pocket costs. -- Mark Scott Johnson CSnet: Johnson@HP-Labs USENET: ...!ucbvax!hplabs!johnson