In article ,
says...
On Sun, 28 Jan 2007 09:30:34 -0800, Mark Borgerson
said:

You can't deduct more expenses than you
have income from the business.

What is your basis for that conclusion?

The fact that the IRS has a "Hobby Loss" segment in the tax code.
You generally have to make a profit 3 years out of 5 in order to
for the IRS to consider it a 'for profit' business.

http://www.wwwebtax.com/deductions_z...bby_losses.htm

"If you lose money pursuing a hobby, you cannot deduct your hobby loss
from your other income on your tax return, but you can deduct your
expenses up to the amount of your hobby income on your tax return. A
hobby loss is a miscellaneous tax deduction on your tax return, though,
and limited by the 2% of AGI threshold."

If the sailing sponsorship is your only source of income, you may
be able to declare a net operating loss, or even deduct the losses
against other income. But you still may have to meet the 3 out of
5 profitable years to avoid the business being considered a hobby.


http://taxes.about.com/od/taxplanning/a/freelance_5.htm

"Hobby Loss Rule of Thumb. If a business reports a net profit in at
least 3 out of 5 years, it is presumed to be a for-profit business. If a
business reports a net loss in more than 2 out of 5 years, it is
presumed to be a not-for-profit hobby.

This rule of thumb places a huge burden of proof on newly formed
businesses. On the one hand, the IRS expects new businesses to incur a
loss. It is normal for a business to have a year or two of losses before
becoming profitable. On the other hand, it is likely that a business
could have several years of losses before ever making a profit. In fact,
several such cases have been sent to the Tax Court. "



So if you don't think the income will exceed the expenses, you should
probably settle for deducting only as much expense as you have
income.

Mark Borgerson