D. Stussy wrote:

- quote -

Anecdotally, I have heard of a handful of instances where an
audit appeared to be triggered by virtue of the taxpayer
filing Form 5213.

MTW

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

In gubment, about a dozen such cases. And in none of them
did they ever turn a profit, like all such cases of
dog-breeding, boat charter, bass fishing, and the like.
Filing a 5213 alerts IRS to place all the returns in
suspense as required by the IRM, and then at the end of the
presumption period, consider coming out and toss the losses.
In cases where a 5213 is not filed -- thus identifiable
only in the normal selection process, often some years are
barred by statute. The 5213, however, extends all the
statutes to the t/p's detriment.

Fred F.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

Maybe that's what it's supposed to do, but I have never had
a client (or myself, as I had filed a 5213 in the past for
myself) examined for the activity the 5213 pertained to.

Have you ever had an audit for IRC 183 reasons for someone
who has filed form 5213?

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

The small amounts and circumstances described by the orig
poster suggests that the activity can be ignored entirely,
as not worth the trouble reporting it, IMO. However, Form
5213 is not a matter of just conservatism. It will cause
returns for several years to be manually reviewed for audit
potential on other issues, and after any exam on them,
placed into "183 Suspense" to await profits. Not a good
plan for the kind money in this activity.

Reg,
Fred F.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Richard Barndt wrote:

- quote -

If you're really paranoid about it, look at the possibility
of filing an IRS Form 5213. [See also IRC Section 183(e).]

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Gary Goodman wrote:
- quote -

but without deducting the cost of any products included in
the 195 which were used for personal use.

ChEAr$,
Harlan Lunsford, EA n LA
Tue, 18 Jan 2005

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

I suggest you take the attitude that she is still in busines
but just not maing a profit. Take the deductions available
and put a business loss on your 1040. If it is worse in
2005, take another loss. Stop when she has NO commissions,
otherwise you have to report the income without any
deductions.

ed

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

richard[at]imt.net says...

- quote -

It sounds like she started with the idea of making money, so
I would take the position that she ran it as a business in
2004. 2005, however, sounds personal.

Summary:

2004
Take loss on Schedule C

2005
ignored for tax purposes

Gary

--
E-mail to the above address is rarely read. If you want to
contact me directly, please send an e-mail to: gary at
gdgoodman dot com.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

My wife is involved with a company called "Homemaker's
Idea." Basically it is similar to Tupperware where she acts
as an agent of the company and sells products from a
catalog. She retains no inventory. So far it sounds like
an independent contract arrangement, which would count as
self-employment income.

Here is the complex part. She is not as interested in the
"selling" aspect as she originally thought. She likes the
products for personal use and may have one or two shows per
year.

In 2004 there was an initial sign-up fee which also covered a kit of sample
products to use in the shows. A majority of these items were actual
products which she uses for personal use while not doing a show. A few
items are samples of color, fabrics, or miniature versions not suitable for
dual use. The original fee was $195. She had one show which generated a
$30 commission payment.

In 2005 the company will require a $50 fee to maintain an
active status. In return she will be sent further sample
products, which are new catalog items or replacements for
previous items which have been discontinued. She may have
one show in 2005 or may just purchase product herself for
personal use. Therefore, it appears this may be a hobby
rather than a business.

So, my question deals with the tax treatment of this
activity. Am I required to fill out a Schedule C for the
2004 activity, showing a loss? It would take commissions of
at least $215 to break even which does not sound likely
based on her current interest in selling. Will it raise
audit flags if there is no business activity in 2005? Any
thoughts?

Thanks in advance

--
Richard

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->