Writing Expenses

[Kram BergGold]

My client has been claiming Schedule C income and expenses for writing. In 2012 she took a trip that was personal but potentially had some business componant to it. Because she had a substantial loss without considering this trip we decided to let it go and revist it if and when she ever did some writing on the subject. Well that time has come. I would like to avoid amending the 2012 return. Even though my client is exempt from the uniform capitalization rules, could I treat these 2012 expense as an inventory item starting in 2015 without having to use the uniform capitalization rules for other expenses? Or can anyone think of another approach?

[Roland Slugg]

I can't think of any justification for deducting in 2015 business expenses that were paid in 2012. A writer's expenses are not "inventory" and can not be treated as if they are. If you and your client are revisiting the travel expenses she incurred in 2012 and now regard them as legitimate business expenses in view of updated information and 20-20 hindsight, then the only legitimate way to deduct them is by filing an amended return for the year 2012.

You may also wish to review the "hobby loss" rules and discuss them with the client if it appears they may apply to her.

[ATSMAN]

I agree with Roland. You can not make these expenses from 2012 "Inventory".

I have one client who claimed Sch C income and expenses after the first book was published and since then it has been a total flop! Now she has agreed with me that it is a hobby!

[Burke]

Many fledgling writers use independent vendors to self-publish, then buy the books themselves. Those are inventory and the publishing costs are allocated to the books and taken as they are sold.

[ATSMAN]

That seems to be very risky. Why would you tie up cash buying inventory like that?

[taxea]

you will need to amend 2012 for the portion of the trip that incurred business expenses.

[Burke]

That seems to be very risky. Why would you tie up cash buying inventory like that?

Ego. They often gift the books to others, and it lets them say they have been "published." And in many cases, these publishers require that a certain number of books be purchased where there is not a known market for them. I have a client who is a full-time counselor who does this all the time. He sells them at seminars when he can. The cost of publishing is allocated to the self-purchased books, and deducted as they are sold.