Taking a business loss?

[PrincessFiona]

A friend of mine here is trying to talk me into becoming a creative memories consultant under her.... WHY? Her dh is a surgeon and she started this past year in order to basically....take a loss to help with their taxes.

Basically, she said she gets to buy all of the fun creative memories stuff she wants at a discount...and...then can take off her office space, laptop...you name it on her taxes.

Does this sound *for real*...do you think it would actually make a difference or is she just trying to get me to sign on the dotted line

kris

[SuzySunshine]

My sister got a sizeable tax return because she took a loss on her Mary Kay business which she started in 2006. Now keep in mind her husband is a teacher so their income is lower and I'm not sure if its something that is just the first year or ongoing but she said it was sizeable.

[PrincessFiona]

Well, that's what she told me as well. She said you can only take the loss for 2 or 3 years but that she is basically planning to stock up on scrapbooking stuff during that time so that she never has to buy again :> and try and have some fun/meet people while she's doing it.

I like scrapping at her house because if I need something she begrudingly says "ok" instead of the "buy, buy, buy" mentality

I'd just check into being able to take the loss even if your income exceeds a certain level. It's true you can take a loss on the business ... I just don't know if the ability to take that loss gets taken away (as w/writing off interest on student loans) once your income hits a certain threshold.

Oh, Oh, I know the answer to this one!! I am a Memory Works consultant and also sell StampinUp! I get to write a buttload off . Although I tend to be my main customer at times, I write off my studio, computer, cell phone, and all of my Scrapbooking convention. Any time you talk about the business, you can write it off. There is not a cap on being able to write it off like there is with Student loan interest and child credits.

DH also has created a business for his fly-fishing "hobby". We were able to write off his boat last year because him and his buddies went out and DH was their "hired" guide, therefore generating some income.

[ides]

This is true. However I would like to encourage caution. The IRS looks at small businesses carring losses suspiciously - for the obvious reasons being posted in this thread. If you continue to have a loss after three years you stand a good chance of being audited or being told that your 'business' is really a hobby, so you can't claim anything from it any longer.

This is true. However I would like to encourage caution. The IRS looks at small businesses carring losses suspiciously - for the obvious reasons being posted in this thread. If you continue to have a loss after three years you stand a good chance of being audited or being told that your 'business' is really a hobby, so you can't claim anything from it any longer.

True. I had this friend who had a client who had 6 sole proprietorships, all with losses- she was audited EVERY year.

Is this lady *actively* selling products to others? If not, it could be considered a hobby (or only passive participation- less likely). Hobby losses are deductible to the extent of income from the hobby. You guys are correct in that a business loss can be carried back to prior returns for 2 years, and carryforward (meaning your business has to produce income at the point) for 20 years.

And remember that even though you may "talk shop", if you are doing something entertaining, i.e. golf, lunch, etc. - it is only 50% deductible.