Question 2 tax 2007

Question 2 tax 2007 - One of your clients owns a farm that...

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One of your clients owns a farm that has been experiencing losses. Should your client claim the losses as hobby losses or on a schedule C? Justify your answer. According to Schedule C’s instructions form, you should use this document to report loss or income only from a business that the individual operated or practiced as a sole proprietor. In order to take this deduction one has to be actively participating in its operations on a continuous and regular basis and it must be for income or profit. You should not use a Schedule C for hobbies or other non-business activities. To deduct hobby losses the qualifications are more stringent. Expenses due to the hobby are only deductible to the extent to which the hobby makes income. To determine if a business is a considered a profit making establishment, in which a Schedule C should be used and any expenses are fully deductible, or if it is a hobby and only
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