Tax Advice for kit hobby?

Jerome Fine replies: Since the original question was with regard to a hobby rather than an actual business, this information may not be helpful. However, tax departments tend to regard a profit making venture as a business. So it is important to document revenue and expenses to prove that the expenses exceed income where that is the situation. The following information is for a company (incorporated) in Ontario, Canada, so it may not apply to IRS practice in the US. In addition, a sole proprietor can't (at least in Canada it is not possible) apply a loss in one year against the next year whereas an incorporated company has that advantage. I have been running a company since 1980 and after about 4 profitable years, I made a profit less than half the time. Around 1998, business picked up again due to Y2K, but after that, there were at least 5 or 6 years with a loss. This year (2007) I finally made a profit again, but if the carry forward losses from previous years exceed the net profit in 2007, there will not be any tax to be paid. Sincerely yours, Jerome Fine -- If you attempted to send a reply and the original e-mail address has been discontinued due a high volume of junk e-mail, then the semi-permanent e-mail address can be obtained by replacing the four characters preceding the 'at' with the four digits of the current year.