Paul Lewing on wed 2 jun 99
Hi, Folks,
At a fair this weekend, I had one of those disasters that periodically
happen on the show circuit, and lost about $700 worth of merchandise. A
person in one of the other booths said I could write off the value of
the stuff as a business loss. I said I might be able to write off the
cost of the materials, but I had already deducted all that when I bought
the materials, and I didn't think I could write off profit I didn't
make. Which of us was right? Personally, I hope she was right, not me.
Paul Lewing, Seattle
Ray Carlton on thu 3 jun 99
dont forget the raw material of your labour
sometimes known as profit...
At 18:07 02/06/99 EDT, you wrote:
>----------------------------Original message----------------------------
>Hi, Folks,
>At a fair this weekend, I had one of those disasters that periodically
>happen on the show circuit, and lost about $700 worth of merchandise. A
>person in one of the other booths said I could write off the value of
>the stuff as a business loss. I said I might be able to write off the
>cost of the materials, but I had already deducted all that when I bought
>the materials, and I didn't think I could write off profit I didn't
>make. Which of us was right? Personally, I hope she was right, not me.
>Paul Lewing, Seattle
>
cheers Ray Carlton
McMahons Creek Victoria Australia
F H Parker on thu 3 jun 99
Paul:
Sorry to hear about the loss. I'm not an accountant, so take this with a
grain of salt. In my (consulting) business if a client stiffs me on an
invoice, then that's just too bad for me in the eyes of the IRS. As you
noted, you can deduct the cost of supplies and materials as well as other
standard business expenses such as rent, utilities and the typical Schedule
"C" items. You cannot deduct an unpaid bill, a loss of product, etc. unless
you're set up on the "accrual" system wherein you calculate tax liability at
the time of billing.
Fred
-----Original Message-----
From: Ceramic Arts Discussion List [mailto:CLAYART@LSV.UKY.EDU] On Behalf Of
Paul Lewing
Sent: Wednesday, June 02, 1999 6:07 PM
To: CLAYART@LSV.UKY.EDU
Subject: business loss
----------------------------Original message----------------------------
Hi, Folks,
At a fair this weekend, I had one of those disasters that periodically
happen on the show circuit, and lost about $700 worth of merchandise. A
person in one of the other booths said I could write off the value of
the stuff as a business loss. I said I might be able to write off the
cost of the materials, but I had already deducted all that when I bought
the materials, and I didn't think I could write off profit I didn't
make. Which of us was right? Personally, I hope she was right, not me.
Paul Lewing, Seattle
Olivia T Cavy on fri 4 jun 99
Paul,
Unfortunately you are right. You get a tax deduction for your business
expenses, including materials costs, when they are purchase by and used
in your business. You have receipts for those expenses. You get the same
deduction for them in your business regardless of whether the pots are
sold at a nice profit or the pots are unsaleable (as in the case of your
loss last weekend). You can only deduct those costs once. You do not get
a deduction for revenue you might have had if you'd been able to sell
those pots. It is possible (though not necessarily economically
feasible) to buy insurance to cover such losses.
Some people play what I call the Audit Lottery Game. It's cheating, but
we all know that relatively few returns will be audited by the IRS, so
some people claim deductions for expenses to which they are not entitled.
If you're not audited, you can deduct anything. But it's not legal.
A self employed person never gets a deduction for the value of his/her
time. If I donate my time to a charity, I get no deduction for the time I
spend. I can get a deduction for my out of pocket expenses like parking
fees, mileage on my car, items I buy for use by the organization, etc.
This has been discussed many times on Clayart, but if I donate a pot to a
tax deductible entity I do not get any deduction for the retail cost of
the pot. I have already included the materials costs and other expenses
on my tax return, and do not get a further deduction for these items.
It's the same when you lose pots that become unsaleable for any reason.
You could include the expenses relating to those unsaleable pots on a
separate line on your Schedule C if the dollars are significant, to keep
your gross profit to sales ratio reasonable, but you're not increasing
your expenses, just moving them.
BTW the only exception I'm aware of, is where I donate a work of art to a
charitable organization that is really going to keep the art for its own
use, and not sell it. In that case I could claim a deduction for the fair
market value.
Bonnie
Bonnie D. Hellman, CPA in PA & CO
Pittsburgh, PA
work email: bdh@firstcaptl.com or oliviatcavy@juno.com
home email: mou10man@sgi.net
On Wed, 2 Jun 1999 18:07:04 EDT Paul Lewing
writes:
>
>----------------------------Original
>message----------------------------
>Hi, Folks,
>At a fair this weekend, I had one of those disasters that periodically
>happen on the show circuit, and lost about $700 worth of merchandise.
>A
>person in one of the other booths said I could write off the value of
>the stuff as a business loss. I said I might be able to write off the
>cost of the materials, but I had already deducted all that when I
>bought
>the materials, and I didn't think I could write off profit I didn't
>make. Which of us was right? Personally, I hope she was right, not
>me.
>Paul Lewing, Seattle
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Tom Wirt on fri 4 jun 99
> ----------------------------Original message----------------------------
> dont forget the raw material of your labour
> sometimes known as profit...
>
Paul...you cannot deduct your own labor or profit you might have made had
the pieces sold. Only if you had someone else make it for you. Since
you've already deducted the materials, firing energy, etc., as part of
running the studio, that's all you can take. No double dipping.
Just as if you build your own studio, you can only expense the materials.
If you hire someone to do it, the labor can also be deducted.
Tom Wirt
John Rodgers on sat 5 jun 99
-- [ From: John Rodgers * EMC.Ver #2.5.02 ] --
Olivia T. Cavy said
>>A self employed person never gets a deduction for the value of his/her
time. If I donate my time to a charity, I get no deduction for the time I
spend. I can get a deduction for my out of pocket expenses like parking
fees, mileage on my car, items I buy for use by the organization, etc.<<
While this is true for the self-employed individual, you can get a deduction
for the labor cost provided you are willing to re-organize and run your
business or studio under the IRS rules for Sub-Chapter S corporations. This
is a very different approach, and requires some discipline regarding the IRS
rules and accounting procedures.
Under this scenario you would be an employee of the corporation, and the
corporation can deduct your labor cost under cost of goods sold ( in
preparing a P & L and a Balance Sheet for you, your CPA will probably
prepare a "Cost of Goods Manufactured" sheet as an attachment to the other
documents. It shows the expenses in manufacturing the products you sell and
comprises part of the "Cost of Goods" statement on a P&L.. )
As I said, it takes some discipline to make this all work, but it is the
approach I personally prefer. It works for me. Should you undertake this
approach, you will find it interesting, but you should really study how it
works, before stepping in to it, to see if it is right for you.
John H. Rodgers
In New Mexico.
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