IRS Schedule C

[Ne0eN]

I was just doing my taxes today and came across a question in TurboTax regarding fishing income.

 

"Fishing income is generated by a trade or business that catches, takes or harvests fish. Fish include finfish, mollusks, crustaceans, and all other forms of marine animal and plant life other than marine mammals or birds."

 

So, let's see - how many of us are actually reporting income generated by the sale of SPS and LPS corals?

 

-- Rob

[YBeNormal]

"Fishing income is generated by a trade or business that catches, takes or harvests fish.

 

Ah, but we propagate coral and breed fish so that doesn't count.

[BeltwayBandit]

*Disclaimer: This is not legal advice, but it does come from an informal discussion with a DOJ Tax Enforcement Attorney.

 

Here's the scoop. Basically selling frags is income, but you can deduct 'hobby losses' i.e. operating/equipment expenses to offset the income. So basically, unless you are turning a profit on your tank, you don't have to report sales of frags as income on your tax return.

 

Again, this is just general advice. If you are concerned or have questions please consult your attorney or tax professional.

 

Here is a bit more information:

http://www.nysscpa.org/cpajournal/2004/904...entials/p46.htm

 

(Takeaway message, hobby losses can only be used to offset hobby profits. To be completely legit you should itemize on Schedule A if you are really worried about an audit.)

[lanman]

(Takeaway message, hobby losses can only be used to offset hobby profits. To be completely legit you should itemize on Schedule A if you are really worried about an audit.)

 

In other words - if you want to deduct ALL of the costs of your reefkeeping, you have to make it a business, with a reasonable expectation of an eventual profit. If it is a hobby, you can only reduce your income by the cost of engaging in the hobby - you can't take an actual deduction.

 

Examples:

My costs for 2006 for my hobby are $3000. I sell corals worth $3500. I must report $500 income.

 

My costs for 2006 for my hobby are $3000. I sell corals worth $2500. I may NOT deduct the other $500.

 

No - I'm not with the IRS; but my dad used to be a tax collector! And oddly enough, he spent many years in Astoria, OR - trying to collect taxes from fishing boat operators. Not an easy job, because most of them only had income for about 2-3 months out of the year.

 

bob