Deductibility...

[David Love]

More on this.  By your reasoning, you could write an invoice for $10,000.
of pro bono work done and deduct that on your Schedule C.  Were you
audited, I don't think the IRS would accept your explanation.  Perhaps a
CPA out there can comment on this.

David Love
davidlovepianos@earthlink.net


> [Original Message]
> From: Arlin Hall <ahall12@austin.rr.com>
> To: <Pianotech@ptg.org>
> Date: 1/30/2004 6:32:16 PM
> Subject: Deductibility...
>
> Hi David,
> In the "Dealer" scenario, you are actually receiving the $65.  Which is
what
> you taxes would be based on.  The dicount of $10 was given in arriving at
> the $65 figure.  So on your books, (and on the invoice) you could show:
>
> +75.00  Tuning Fee
> -10.00  Dealer Discount.
> ------
> $65.00  Net amount due.  (and net amount of taxable income)
>
> In the referral fee scenario, you indeed receive $75.00.  But you also
write
> a $10.00 check as a referral fee, which is a tax deductible expense.
> Granted, that won't be shown on the customer's invoice because the
referral
> fee is paid out to someone else.  But on your financial statements and tax
> return Schedule C the net effect is the same.
>
> +75.00  Tuning Fee
> -10.00  Referral fee paid out to someone else.
> ------
> $65.00  Net amount kept by you, and reported on your taxes, as far as this
> tuning is concerned.
>
> In both scenarios, you end up with $65.00 net taxable.  Not $55 or $75 as
> you stated in your response.  (I see in a later post you did change the
$75
> to $65).
>
> Arlin Hall, CPA
>
> -----Original Message-----
> From: David Love [mailto:davidlovepianos@earthlink.net]
> Sent: Friday, January 30, 2004 7:59 PM
> To: Pianotech
> Subject: RE: Deductibility of referral fees, etc.
>
>
> It's not quite the same thing.  However you book it, your income is based
> on money actually received and you would be deducting $10.00 from $65.00
> worth of income paying taxes then on $55.00.  In the referral fee
scenario,
> you receive $75.00 and you pay out $10.00 with a taxable remainder of
> $75.00.  Of course, you could always deposit the money in an offshore
bank.
> Or just pretend you did, like those great guys over at Enron.
>
> David Love
> davidlovepianos@earthlink.net
>
>
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