Purchasing from lesser known makers

Hi Joss,

"As a side note, I'm not sure if your response answers my question: can I use any tax deductible expenses from my knife collecting activity against my regular taxable income? If yes, that can be interesting."

There are no tax deductible expenses from your knife collecting that can be deducted from your regular taxable income. The only exception would be costs associated with the sale of a short or long term capital gain. But if it is just you selling to someone there would be no costs. However, if you had a broker sell you knife for you those fees could be deducted. But only equal to the amount of the Capital Gain.

However, you can deduct every allowable expense for Joss LLC or Joss Inc.

Joss all I can go by is my experience. Which started as a Sole Proprietorship and moved to a C Corp (LLC or LLP didn't exist at the time).

I don't know what the other thing was your CPA advised you against doing. Each area has different parameters. His advice might have been spot on for that.

I can't speak of the unknown. From my experience I can tell you what I proposed does, with some effort, work. I have had 2 CPAs over the last 22 years, both showed me how to legally do what I am recommending.

I realize that I was willing to put forth much more effort than the average collector.

If it was easy, everyone would do it.

WWG
 
OK, I think we're on the same page. I agree with you that the method you propose is probably the best one to both be bulletproof from a leagl stand point and at the same time reduce your tax liability on your occasional profits.
 
The only real hard part of it is to keep accurate records and reciepts of all your transactions and expenses. Then you will know if you are in the positive or negative area. Do this for a while without being in business and see how it stacks up. You will be surprised that your profit wasn't nearly as much as you thought. A plus of this is that your business trips "can be" enjoyable. The IRS doesn't say you have to hate the trips in order to write them off.
A good CPA is well worth the investment. I mean one that knows the rules and is not afraid of playing by them.. I had one for a very short time that was afraid to deduct almost anything that wasn't a lead pipe cinch. I have been audited and have come out better after the audit. The worst you can do it be not allowed some deductions that may be questionable.
Any way, that has been my experience of being in business.
 
Hi Joss,

"I agree with you that the method you propose is probably the best one to both be bulletproof from a legal stand point and at the same time reduce your tax liability on your occasional profits."

That is exactly the object of the exercise. Well put!

WWG
 
Hi Ray,

What a lot of people forget is that the reason tax deductions exist is so that more business will start up.

More business's mean more employee's which means more taxes for the Government.

The IRS is not the Boogyman. They are there to insure compliance to the tax code.

There are expenses that are deductible. There are "expenses" that are not deductible. Then there are those you get to thumb wrestle over.

If your business is consistently filing a return that is deducting the maximum "Allowable" expenses. You are good to go.

WWG
 
As a part time maker, I wouldn't claim it as a business, even though I spent a lot on travel and schools (hammer-ins), it didn't seem like it was all that much. When I started keeping track, I started the business. That is when I changed CPA's . :)
 
Hi Ray,

What an excellent post.

That post should be somewhere on the ABS, Knifemaker's Guild and PKA web sites.

WWG
 
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