Arbonne loss generates EIC?

[jasdlm]

Client sells Arbonne. Bought quite a bit of product this year, so has a $24,000 Schedule C loss. Husband makes $55,000. 2 kids. EIC is calculating. This doesn't seem right, but I can't think of any reason other than philisophically it's just not right.

Thanks in advance for your thoughts.

[JohnH]

What about inventory at year-end?

Just because she bought it doesn't mean she sold it.

[jasdlm]

She took a bunch out for 'demos'. Do you think I should keep those in inventory? She also gave quite a bit away in 'sales gifts', etc.

I hate this stuff.

[Jack from Ohio]

A $24,000 Sch C loss for a direct sale business, will almost certainly be audited. Get a retainer!!

[Catherine]

She took a bunch out for 'demos'. Do you think I should keep those in inventory? She also gave quite a bit away in 'sales gifts', etc.

I hate this stuff.

"Demo's" are frequently really personal use; she "bought" the stuff at cost if she uses it herself. "Quite a bit" as sales gifts -- how much? Sounds fishy -- get it clearly, in writing from her, so you don't get blamed for "mistakes" when they get the audit notice. And definitely don't file this one without getting paid first.

Catherine

[jasdlm]

I am absolutely not going to do this. I'm just going to use the ending inventory number she gave me and consider the remainder withdrawn for personal use. If she wants it done another way, she can go somewhere else. It's so late anyway, and I'm still waiting on one last item. Driving me crazy. Thanks for the sound advice. If she wants to go elsewhere, I'll be happy to file a 4868 for her to give her time to find someone else.

Why in the world would someone purchase $16,000 worth of product when annual income is around $3,000?

[JohnH]

Somebody probably promoted it to her as a great way to save money by taking "tax losses". Lots of these direct sales and MLM schemes play on that idea and people are gullible enough to fall for it.