Business expenses No income

[Bonnie]

Have taxpayer who started in Real Estate in 2017. She has some expense for license, and realtor association dues but no sales in 2017 so no income. Normally I don't do a Sch C without income but in real estate I realize this can happen. How would you handle this

[ATSMAN]

This is usually typical in the Real Estate sales profession. You have to determine the answers to two questions based on facts:

Was the taxpayer actively engaged in a trade or business.
or
Was the taxpayer preparing to begin the trade or business.

In general taxpayer can either deduct or amortize start-up expenses once the business begins rather than filing a Sch C with 0 gross receipts.

If taxpayer actively engaged in the trade or business but didn’t receive income, then they should file Sch C, 0 gross receipts and the appropriate expenses.

Remember the 3 out of 5 years profit (rule of thumb) otherwise it may be considered a hobby!

[taxea]

Given the 3/5 year rule I recommend she not do a Sch C until the year she has income. then she can amortize prior expenses as start up.