sch c with no income

[theresa d]

taxpayer has a full time job and a schedule c for fees earned as a part time real estate agent. she had no sales this year but did incur cost of $5000 which are legit-auto, advertising etc. do you see any problem with the sch c showing expenses with no income?

[Chief]

Schedule C

Theresa D: I had a client exactly like this --almost. In addition to not having any income as a realtor (this was her first year) the joint income for both her and husband was less than the threshold to pay any taxes. I advised her not to file Sch C. She had gone to Amscot and they were; I supposed to get a larger prep fee. I figured if she was going to file 3 years with negative income she did not need to begin now. Her husband had overpaid so I prepared a joint return so he would get his money back.
Did she have other income or joint income to report or taxes to get back in refunds? If she did then you probably want to consider these factors?

[rosieea]

taxpayer has a full time job and a schedule c for fees earned as a part time real estate agent. she had no sales this year but did incur cost of $5000 which are legit-auto, advertising etc. do you see any problem with the sch c showing expenses with no income?

I'd suggest a look at page 5-21 of TTB. Using those factors as a guide, can you conclude that a business truly exists? If so, take the loss.

[theresa d]

will take

thanks for the responses. i think she is entitled to the loss. she has had a profitalble schedule c for many years. in discussing it further with the client the closing on several houses had been delayed and she received commissions recently in 2006. will take the loss in 2005 for the expenses she incurred in 2005. thanks

[Black Bart]

No Income

I know what you mean about being a little leery about taking the loss. You look at it and think that, well, it just looks funny to have a "C" with all expenses and a zero at the top. And...it does. But, apparently, it happens quite a bit because I've done it about half-a-dozen times and haven't been checked yet. So I don't think it stands out and grabs IRS attention like you'd think it would. On the other hand, I''ll tell you something that will get you checked P.D.Q. and that's a loss in the gross, that is, when your cost of sales figure exceeds the sales. I've done that twice (once on an Amway-type business) and been checked both times.

Anyhow, I'd go ahead and do it. Odds are you'll be okay--and even if you aren't, it's a legit expense.