Continuing Depreciation but no 1099 Income

[taxtoddnyc]

Client is a produced & published playwright (with a regular corporate survival job). When paid as a playwright, he receives 1099s for fees and royalties, so we usually file a Sch. C. But 2008 was lousy, and he had no 1099 income. However, we started depreciating about $2,200 of computer equipment in '07, so the 2008 depreciation is of course is showing up on the C this year, creating a loss of about $700.

Not sure how to deal with this.... go ahead and file a C showing $0 income but with the depreciation plus about $3k of other ongoing playwright expenses, or let it slide this year and thereby avoid any questions. It seems only right to continue filing for the playwriting, at which he's been and will likely continue to be successful, but with the increased scrutiny of Sch. C returns these days, I'm loathe to create a problem where it doesn't exist. He's also married, with not nearly enough on Sch. A to itemize. Any opinions on where to go with this? Thanks much... love this forum!

[TAXBILLY]

You would be correct to continue taking the depreciation. I doubt the IRS is going to spend time and resources to question a $700 loss.

taxbilly

[kcjenkins]

I'd say take it. And remember, the IRS has those 'occupation codes' for a reason. They evaluate returns taking into consideration the type of business. For a writer, income ups and downs are normal, not flags.

[joelgilb]

just because he had no income as it was a bad year doesn't mean he discontinued his business.

Although you might want to ask him this question