Announcement

**joanmcq** · 04-09-2011, 10:18 PM

It depends. How much of a loss? What caused the losses; investments in necessary equipment or tons of meals & travel? What is he doing to make money/promote his biz?

Reminds me of when I worked for a big CPA firm, and I was handed the return of the brother of one of our clients, "see what you can do with his 'music business'". I went through the docs and saw a 1099-Misc issued by Prince Nelson, and the client lived in Minneapolis. Having had a long and illustrious record store career before I became a tax geek, I knew Prince Nelson is the given name of 'The Artist Formerly Known as Prince' (and now again known as Prince), world known, mulit bazillion dollar recording star of the 80's. I said 'yo, I think this guy really is a musician', and showed them the 1099. No one else in the tax department had a clue who Prince was. At this point I'm shaking my head, so I googled the client. Long and illustrious career from the early 60's on. Big time funk bass player.

Ya never know...

**DTS** · 04-09-2011, 11:34 PM

Az

I have several recording and performing musicians and I can send you a link or two tomorrow that might help you.

**Gary2** · 04-10-2011, 07:10 AM

DTS: If you could send me those links, too, I'd appreciate it. Better yet, unless they're really not for broad distribution, why not just post them?

Back to the original question: It sounds like you have one more year for the three out of five guideline. Find out if it's really a hobby in his mind, or he really wants this to be a serious career, even if only as a second job.

If he's serious about being serious, then explain what it takes. Emphasize to the client that treating it like a real business is very important - separate books, business plan, advertising, business cards, a legitimate hope of making a profit, a web site, selling CDs and/or MP3s, paying for copyright licenses, possibly union or association fees, etc. Encourage him to look for agents and advisors, particularly if there's someone who can help with the business plan part and who understands this business (but the SBA if necessary). That doesn't necessarily mean signing with an agent right away, since it's unlikely he'll find a good one willing to take him at this level. Make sure he knows that he has to plan on working hard.

The reason I said guideline is that not all industries are the same. The stories about starving artists and actors working in restaurants by day aren't simply a stereotype; that's what the industry is like. If it's challenged by the IRS, you'll have to show all the business-like aspects and then argue that it's normal in this type of industry to take more than three years to turn a profit.

And please, as mentioned recently in another thread, don't take MACRS, let alone 179 or bonus; do all the equipment as straight line.