Actually, if you run a business in a residential area, the surrounding home values descrease. So you are in fact having a VERY negative financial impact on those around you. I'd be pissed if someone else did something to drop $10K off my property value. Just food for thought.
I need a lawyer that's a fish geek
- Thread starter Regalblue
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Actually, if you run a business in a residential area, the surrounding home values descrease. So you are in fact having a VERY negative financial impact on those around you. I'd be pissed if someone else did something to drop $10K off my property value. Just food for thought.
you might be able to fight it if you don't meet the IRS's definition of a business.
http://www.irs.gov/newsroom/article/0,,id=169490,00.html
Business or Hobby? Answer Has Implications for Deductions
FS-2007-18, April 2007
The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit.
In order to educate taxpayers regarding their filing obligations, this fact sheet, the eleventh in a series, explains the rules for determining if an activity qualifies as a business and what limitations apply if the activity is not a business. Incorrect deduction of hobby expenses account for a portion of the overstated adjustments, deductions, exemptions and credits that add up to $30 billion per year in unpaid taxes, according to IRS estimates.
In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.
In order to make this determination, taxpayers should consider the following factors:
Does the time and effort put into the activity indicate an intention to make a profit?
Does the taxpayer depend on income from the activity?
If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
Has the taxpayer changed methods of operation to improve profitability?
Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
Has the taxpayer made a profit in similar activities in the past?
Does the activity make a profit in some years?
Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.
If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). These deductions must be taken in the following order and only to the extent stated in each of three categories:
Deductions that a taxpayer may take for personal as well as business activities, such as home mortgage interest and taxes, may be taken in full.
Deductions that don’t result in an adjustment to basis, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
Business deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.
http://www.irs.gov/newsroom/article/0,,id=169490,00.html
Business or Hobby? Answer Has Implications for Deductions
FS-2007-18, April 2007
The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit.
In order to educate taxpayers regarding their filing obligations, this fact sheet, the eleventh in a series, explains the rules for determining if an activity qualifies as a business and what limitations apply if the activity is not a business. Incorrect deduction of hobby expenses account for a portion of the overstated adjustments, deductions, exemptions and credits that add up to $30 billion per year in unpaid taxes, according to IRS estimates.
In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.
In order to make this determination, taxpayers should consider the following factors:
Does the time and effort put into the activity indicate an intention to make a profit?
Does the taxpayer depend on income from the activity?
If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
Has the taxpayer changed methods of operation to improve profitability?
Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
Has the taxpayer made a profit in similar activities in the past?
Does the activity make a profit in some years?
Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.
If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). These deductions must be taken in the following order and only to the extent stated in each of three categories:
Deductions that a taxpayer may take for personal as well as business activities, such as home mortgage interest and taxes, may be taken in full.
Deductions that don’t result in an adjustment to basis, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
Business deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.
^ Good point. If I want to use my tools to build a new tank stand, and then I build a couple for friends and they pay me - then am I running a business? Is that really taking away from the neighborhood to do this on my property? How much different would it be if I build three stand for myself - the noise, work, etc would be the same. Property values bah. If my property value stays the same for 50 years I'll be happy - it means I won't be paying huge property taxes either. Considering I live in a blue collar town, you couldn't keep us from working at our homes to some degree - we don't have the money around here to buy everything, many things are bartered for or traded for. Whether its repairing cars and trucks in the driveway for computer repairs or mowing lawns for fence work, it happens.
I own a rental and it has a HOA and I love it! I bought the rental as an investment and I really need it to be profitable. The HOA helps in this area.
I own/live in another house with out a HOA and I love it! I can't stand people telling me what to do. I don't care what the property value is, it would even be nice if the property value dropped making the taxes drop. I don't care because I'm not moving.
It is what it is. Use the advantages for your benefit. For example: Some cheese head is sawing up wood for a couple stands next to my investment property I'm sending the retirees over there to harass him. No one has as much time as the old blue haired retirees......
Same guy in my neighborhood? I'm walking over with a 6 pack to talk his ear off about the new project
A guy down the street from me welds, guess who has a new MFK metal stand now 
Good thinking!!I own a rental and it has a HOA and I love it! I bought the rental as an investment and I really need it to be profitable. The HOA helps in this area.
I own/live in another house with out a HOA and I love it! I can't stand people telling me what to do. I don't care what the property value is, it would even be nice if the property value dropped making the taxes drop. I don't care because I'm not moving.
It is what it is. Use the advantages for your benefit. For example: Some cheese head is sawing up wood for a couple stands next to my investment property I'm sending the retirees over there to harass him. No one has as much time as the old blue haired retirees......
Same guy in my neighborhood? I'm walking over with a 6 pack to talk his ear off about the new project
I own a rental and it has a HOA and I love it! I bought the rental as an investment and I really need it to be profitable. The HOA helps in this area.
I own/live in another house with out a HOA and I love it! I can't stand people telling me what to do. I don't care what the property value is, it would even be nice if the property value dropped making the taxes drop. I don't care because I'm not moving.
It is what it is. Use the advantages for your benefit. For example: Some cheese head is sawing up wood for a couple stands next to my investment property I'm sending the retirees over there to harass him. No one has as much time as the old blue haired retirees......
Same guy in my neighborhood? I'm walking over with a 6 pack to talk his ear off about the new project
That's pretty #$@%% to have such a double standard. The less wealthy people who can't afford to buy but are renting your house have to live by a different set of standards than you. I don't live in a HOA area, they aren't popular here fortunately, but it seems like they're mostly busybodies nitpicking on people.
If they're going to exist, they should only enforce egregious violations of the rules - somebody who has a legitimate business with commercial machinery operating out of their garage, or turning their lawn into a parking lot.
The OP has a hobby that he happens to sell fry from. According to those IRS regs posted above, he isn't concerned about making efficiencies to increase profit, depending on the income from the hobby, increasing the value of assets used in the hobby, etc. therefore it is a HOBBY.
To the OP, I would fight, even if you intend to move soon.
So I if i lived in an HOA and started one of those online drop shipping businesses, I would be in violation and have to leave because i would work from home. That's just not right.
Every HOA is different. The main point of an HOA is to maintaining property values. When a person has their life savings tied up in their house, a HOA can be appealing. You wouldn't want your neighbor painting his house puke green or installing a kegger in the front yard...
