Fishing Tournament

[Earl]

Had client who won less than $1,000 in a fishing tournament. Reported on 1099Misc as other income. Clent enters numerous tournaments during the year. Now wants to take his expenses for year for entry fees, hotels, travel, boat, etc. I do not feel right in taking a loss in this situation, however, I would like to keep him from paying tax on his prize. He does not have sufficient itemized deductions and will have to use standard deduction so it looks like hobby rules would not keep him from paying tax on it.

ANy suggestions how to handle this. What do others do with this type of income.

[KJ Judd]

He is not in the trade or business of supporting himself via fishing tournaments. You need to report the Form 1099-MISC amount on Page 1 of Form 1040. The related expenses (only up to the amount of income) are allowed as an itemized deduction.

I had a client in the same situation last year. He wasn't very happy with the results of my research either.

[Burke]

I agree. I did it this way for years with a client who entered tournaments all over the country. Even tried it full-time for a while, but could not support himself and went back to work. Expenses up to income only on Sche A subj to 2% exclusion.

[Black Bart]

Depends

on lots of things, I guess.

First, if it's just a one-time thing that he gave a shot and it didn't work out -- will it go away after this year? If yes, I might C-EZ it if expenses aren't outrageous. Occasionally a ne'er-do-well leopard you take a chance on will later change his spots and evolve into a pretty fair client because of your helping hand.

Two, did he/does he do anything else besides fish? If not, then apparently he tried to make some money -- no matter whether against all odds and/or how stupid it is and that's a business. And it's not against the law to enjoy your (fishing) work.

Three: is this a reasonable person? A stock car racer once asked me to write off $10K against...umm...$300 winning, I think it was. He flatly declared he liked to race, intended to continue regardless of losses, and was "a professional racer" although repairing cars ("on the side" he said) took up 95% of his time. I sent him away (think "the guy down the street" actually did it for him). No idea what ever happened on it.

Four; do you like this person. If looks, tone, demeanor, whatever, gives you that bad feeling -- 99% of the time it's right. A semi-shady chiseler who just wants a tax cut will put you on the spot year after year after.... So, you gotta stick with your "hobby" position and run him off.

I saw something last year by a regular poster (DaveO) that neatly summed up IRS' position about this (I'm paraphrasing): "If there's a gain, it's a business. If there's a loss, it's a hobby."