Non-revenue-producing (Was: cctech Digest, Vol 96, Issue 5

On Tue, 16 Aug 2011, William Donzelli wrote: THIS group?? Actually, some IRS agents consider home businesses and small sole proprietorships to be "low hanging fruit". They OFTEN audit home businesses, and some things, such as operation at a home are flags that significantly increase likelihood of audit. Especially if the business operates at a loss. (Contrary to internet, there is NOT a "law" that a business must make a profit 2 years out of every 5, nor any other such defined limit. Instead, determination of "business" V "hobby" is very loosely defined, and to a large extent determined by the whim of the agent, based on things such as, "is the intent of the enterprise 'to make a profit'?", "is it conducted with conventional business practices?", "business type location?", "regular hours?", advertising?, interaction with people not already known to proprietor?, etc. with NONE of those being sole determinator. The "hobby" V "business", although not readily objectively determinable, is VERY important. If there is gross profit, then the IRS wants tax forms. If there is net profit, then it IS taxable. If there are recurring losses, the IRS may decide that it is a "hobby businesess" and disallow any losses or expenses past the gross. A home business is much more likely to get such restrictions than a big business that might ALSO operate at a loss for many years, since that is much more clearly "not a hobby". In the USA, if the business is making money and paying taxes, very little else matters. If Al Capone were to have paid his taxes, it might have become president.