Tuesday, August 26, 2008

Punchline of the Week

From a professional CPA's web page detailing Court Cases Regarding Hobbies and/or Businesses--specifically, what income tax deductions the IRS will allow:
WRITING WINNER WHILE LOSING: Taxpayer was not allowed to deduct some of his "research expenses" relating to his writing activities. He paid to have his book published, which it was. However he had a loss from his writing business. The Tax Court, and the Fourth Circuit, ruled against the IRS in determining that he did in fact have a profit motive. In spite of the recreational aspect of his writing, the court concluded "these factors were outweighed by the business-like manner of his recordkeeping, the diligence of his marketing, and the start-up nature of his losses." Unfortunately, his largest deductions were disallowed because they were "so personal in nature as to preclude their deductibility." He wrote about prostitution. (Vitale, T.C. Memo 1999-131)
And, because you know I love primary sources, here's the complete text of Tax Court Memorandum 1999-131 in PDF and HTML. It's also worth reading the court document to get the details of how this poor sap was scammed by Northwest Publishing.


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