Danielle Anderson, your client and a cash method taxpayer, works full-time at a music store located in
Question:
2009 ........................... $(5,000)
2010 ........................... 2,100
2011 ........................... 3,000
2012 ........................... (1,800)
Danielle has come to you on December 12, 2013. She understands that the IRS can deny losses generated by her performing business if it determines the business is actually a hobby. Because of the uncertainty of the entertainment industry, she will likely continue to generate profits in some years and losses in others. Still, she continues the activities with the intent to earn a profit.
Danielle routinely sends bills to orchestra clients at the end of the month for work she performed during the month. Most of her clients, including the Springville Orchestra, send payment within ten days of when they receive her bill. The following is a summary of the business' financial position for 2013 as of 12/20/2013:
Income received to date .................................................................. $9,000
General expenses paid to date ........................................................... 9,200
Other items:
Bill for refurbishing work on cello, due 1/2/2014 .................................... $ 300
Newspaper bill for monthly advertisement, due 1/14/2014 ......................... 200
Printer bill for business cards, due 1/5/2014 ............................................ 500
Meals eaten while in transit to performance locations ................................. 150
Income for 12/3/2013 performance with the Springville Orchestra .................. 1,000
What will you recommend to your client? What issues must you address? What actions will you take to ensure the most favorable tax outcome possible? What advice, if any, will you give your client for the future?
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Related Book For
Federal Taxation 2014 Comprehensive
ISBN: 9780133438598
27th Edition
Authors: Timothy J. Rupert, Thomas R. Pope, Kenneth E. Anderson
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