Artist wins vs IRS

If you create art and try to sell it, can you deduct your related expenses? If your art is just a hobby then you can deduct expenses up to the amount of income, but if it is a business then all related expenses are deductible even if your expenses exceed your income. In a recent tax court case, Crile v. Comm’r, T.C. Memo. 2014-202 (10/2/14), the IRS disallowed expenses in excess of income since the activity had never generated a profit. However, she proved in tax court that she had a profit motive and that is what is necessary to deduct all business expenses. There are several factors used to determine profit motive. You can contact your local Enrolled Agent for expert advice in analyzing this complex area of tax law.

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