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Waterskiing as a write off

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Comments

  • Ed_ObermeierEd_Obermeier Posts: 1,339 Crazy Baller
    "Being able to justify that you are " actively seeking a profit" is crucial when taking deductions against your self-employment income. Also, as a rule of thumb, the IRS typically won't raise any questions as long as a business shows profits 2 out of 5 years (some recent court cases suggest 3 of 5 years)".
    My tax person has told me that you don't ever have to show a profit period, you only have to be able to prove that you're making a reasonable effort to turn a profit. Is she totally incorrect? I was in business a LONG time before I ever turned anything even resembling profit, never an issue.

    Ed
    Ed Obermeier - owner, EZ-Slalom Course Systems
    www.ez-slalom.com
  • aswinter05aswinter05 Posts: 363 Baller
    @Ed Obermeier Great question that I can't even answer with 100% certainty. As I mentioned in my post "the IRS typically won't raise any questions" is the general rule which most tax professionals will hear at a seminar. They may raise questions, however, that doesn't mean that they will disallow a loss if you can prove you are actively seeking a profit. Your tax person could be correct but there are some things the IRS tends to keep to themselves when it comes to "drawing a line". I know for a fact that I have farm clients who haven't shown a profit 2 out of the last 5 years. They've shown losses most of the time. I also know for a fact that they have yet to be audited within the same time window. I've always taken the rule of thumb to mean that your tax return has a better chance of being subject to an audit if you show losses in "too many" consecutive years.
  • KelvinKelvin Posts: 1,187 Mega Baller
    The profit in 3 of the last 5 years is a safe harbor presumption which generally gets you over the hurdle with little additional scrutiny. If you fail that test, it depends on the business you are in. Manufacturing slalom courses for a profit isn't in the same category as leasing your personal airplane or being a gentleman farmer/rancher. The rules are targeted more at hobbies.
    Kelvin Kelm, Lakes of Katy, Katy Texas
  • aswinter05aswinter05 Posts: 363 Baller
    Also, it's not necessarily that they will "disallow" a loss. It's that they could reclassify your business activity as a hobby. Here is a link that explains it. It also looks like they've changed their profit window to "3 of 5 years" except for certain business activites.

    irs.gov/uac/Is-Your-Hobby-a-For-Profit-Endeavor%3F
  • MattPMattP Posts: 6,094 Mega Baller
    For the non profit sports team I coach at. I could do this when I was a private contractor. Not so much they made us employees now for legal reasons.
  • Ed_ObermeierEd_Obermeier Posts: 1,339 Crazy Baller
    Good info guys, thank you for the input.
    Ed Obermeier - owner, EZ-Slalom Course Systems
    www.ez-slalom.com
  • raynrayn Posts: 388 Baller
    So tell me this. If USAWS is a charitable organization and I volunteer at say regionals/nationals any sanctioned event as a judge, driver etc with no compensation. Can I write off my expenses for driving, eating and lodging for each day I am doing volunteer work. If that is the case I like where this is going. In addition I would think that I would no be able to write off the entry fee to ski.
    Ray Newmark -
  • WaternutWaternut Posts: 1,511 Crazy Baller
    Profit or loss, I would think you would have to show some kind of monetary gain at some point to justify it's a business. If all you do is spend money, that's not a business and I don't see how you can claim any expenses.
  • HortonHorton Posts: 28,774 Administrator
    edited January 2013
    Yea guys - it can't be that you just don't want to pay taxes. I don't want to pay them and that is why I have found legal ways to write off stuff I do for fun.

    I always show at least a small profit every year but still come out way ahead. I figure that if I claim a loss very often eventually it will catch up with me.

    The trick it to find a legit hobby business. (I do not recommend a web site.)
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  • MattPMattP Posts: 6,094 Mega Baller
    The trick it to find a legit hobby business. (I do not recommend a web site.)
    or iPhone apps....
  • SkiJaySkiJay Posts: 2,314 Mega Baller
    I've been through this mill with car racing. You don't have to be profitable, but you do have to prove that you have a profit motive during the inevitable audit. Apparently there are LOTS of ways to trigger an audit, including no profit for three years, claiming substantial losses, making foolish statements in social media, being reported by a disgruntled competitor, and many more.

    When the audit comes, and it will, you have to show that you are running your affairs in a businesslike manner, and that you have a believable plan. You have to convince them that a steady profit or big payback is just around the corner. Realistic profitability is nearly impossible to substantiate in waterskiing unless you are Horton who may land that massive ad account any day now. You don't have to actually make the profit, but you have to convince them that you have a good shot at it.
    www.FinWhispering.com ... Your ski should be your dance partner, not a wrestling opponent
  • HortonHorton Posts: 28,774 Administrator
    @SkiJay I totally agree. My approach is to show a small profit even if I could have written off more and showed a loss.
    Support BallOfSpray by supporting the companies that support BallOfSpray

    Connelly ★ Basta ★ DBSkis ★ Denali ★ Goode ★ Hobe Lake ★ MasterCraft

    Masterline ★ McClintock's ★ Performance Ski and Surf ★ Reflex ★ Radar 

    Stella Blue ★ Stokes ★ World WaterSki League

     

  • BraceMakerBraceMaker Posts: 4,140 Mega Baller
    What would the tax incentive be behind "sponsoring" ones self as a skier.

    Lets say a person works as... let us just pick something mundaine, like a car salesmen. And he owns a little dealership. And that dealership chooses to purchase each year an offlease late model ski boat, and provide a certain party with a "contract" that they will use said boat to waterski on a local lake, it is of course festooned with advertisments. As is the truck that is provided semi-yearly (with wrapped advertisements), and the party that was contracted was then also the owner of the business?

    In this case there is a legitimate business with income, that could choose to sponsor a skier. Is there any way that a person could reasonably claim that sponsorship as a business expense?
  • liquid dliquid d Posts: 1,201 Mega Baller
    ya'll quit trying to cheat on your taxes! America needs your money now...we got lots of useless crap to pay for! I'm reporting everybody...hahaha
  • HortonHorton Posts: 28,774 Administrator
    image
    Support BallOfSpray by supporting the companies that support BallOfSpray

    Connelly ★ Basta ★ DBSkis ★ Denali ★ Goode ★ Hobe Lake ★ MasterCraft

    Masterline ★ McClintock's ★ Performance Ski and Surf ★ Reflex ★ Radar 

    Stella Blue ★ Stokes ★ World WaterSki League

     

  • ScaredOfCorbetsScaredOfCorbets Posts: 87 Baller
    Maybe one chance of hope is to create an entity for tournaments. BOS Watersports Events, LLC. Create, sponsor, and run tournaments etc. Than you can write off a lot, such as travel expenses.
  • WaternutWaternut Posts: 1,511 Crazy Baller
    When people say "don't cheat your taxes", this is what always comes to mind for me.

    MattP
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