[GNC] Another "multi-account" logical issue - any advice on how to register this?

[Chris Miller]

Hi Michael,

A point of clarification:

> Here in the US if your hobby does produce an income, that IS taxable,
> but because a hobby, expenses count only toward reducing that income. In
> other words, losses from the hobby cannot be used to offset other
> income. For this reason, the tax folks will usually try to judge the
> activity as hobby if not making profits X years out of Y. Understand?
> YOU can end up owing them more taxes if "hobby" rather than business but
> never the other way around. So even if I planned the activity as a hobby
> I would want to keep the books correctly for a business.

I concur in part. In a "hobby", expenses are no longer deductible to the extent of income, as you said, however, if you have "hobby" income, then maybe you really have a nascent business. Who's to say? Account for the hobby like a business, and deduct expenses, to the extent of income. Be judicious. This is another reason why acquisition and deployment expenses are debited to the asset -- so they don't show as expenses until there is income corresponding to a sale. Of course expenses that are not related to asset acquisitions and deployment, like maybe a training course on restoration, would be a deductible expense. Of course, all the this shady "gray area" vanishes if your hobby is profitable.
-- 
Chris.