Artist - Commissioned to create work

[jasdlm]

I am struggling with a schedule C. Client is a University Art Professor. Client was commissioned to create a large piece for installation at another University, through a federal grant, as part of a non-profit program working to promote awareness of violence against women. Client received $16,000 for the work. Client has document expenses (mostly materials but some travel costs for installation in another state) totalling more than what the client was paid. The University that commissioned the work was unwilling to reimburse client for expenses - simply paid the $16,000 and issued a 1099.

The problem is that after the non-profit campaign is over (not sure on time - maybe 1 year), the University wants my client to retrieve the piece. The piece is not resellable in the opinion of my client because it is very specific to the campaign and the instructions of the University. However, how do I deduct all of the costs (or can I) when essentially the piece is still 'owned' by my client? I really hate to see this client owe several thousand dollars in Income tax and SE tax, but I'm not sure how else to handle this.

Thanks in advance.

[ILLMAS]

I am struggling with a schedule C. Client is a University Art Professor. Client was commissioned to create a large piece for installation at another University, through a federal grant, as part of a non-profit program working to promote awareness of violence against women. Client received $16,000 for the work. Client has document expenses (mostly materials but some travel costs for installation in another state) totalling more than what the client was paid. The University that commissioned the work was unwilling to reimburse client for expenses - simply paid the $16,000 and issued a 1099.

The problem is that after the non-profit campaign is over (not sure on time - maybe 1 year), the University wants my client to retrieve the piece. The piece is not resellable in the opinion of my client because it is very specific to the campaign and the instructions of the University. However, how do I deduct all of the costs (or can I) when essentially the piece is still 'owned' by my client? I really hate to see this client owe several thousand dollars in Income tax and SE tax, but I'm not sure how else to handle this.

Thanks in advance.

From what it seems you client is at a loss when you take the payment less out of pocket expenses, so there will be not tax due, also maybe not a good idea (more travel expenses, I assume) to pick up the art work, let the university deal with it.

[kcjenkins]

How about if he signs a letter 'donating' all his claims to the piece to the organization that is sponsoring this? He might suggest in the letter that they auction it off at the end?

[jasdlm]

A very good idea. I will suggest it and hope the University agrees! Thanks to both of you.

[JohnH]

Wonder how likely it will be that the university ever gets cooperation from another artist once word gets out about the shabby way they handled this situation.

[Julie]

Try it this way: He was paid by the University not for a piece of art--they don't want it--but to put on an exhibition. The actual piece of art is then just a prop in that exhibition. He put on the exhibition as agreed and was paid for it.

[DANRVAN]

I believe Julie is on the right track. It’s like he created a billboard for an ad campaign and is responsible for removing the billboard. Go ahead and take the expenses. If he is able to sale the exhibit later, that’s a separate transaction.

[JohnH]

Agreed, provided the responsibilty to remove the piece was understood up front. I got the impression from the OP that the rules were arbitrarily changed by the university in the middle of the game. As I re-read it, this may have been an erroneous assumption on my part.

[jasdlm]

Thanks to all for the great input. Yes, the client knew from the beginning that the piece had to be removed. Sorry for any ambiguity in the original post.

[jainen]

>>how do I deduct all of the costs (or can I)<<

Does the professor do a lot of this kind of thing? Because it seems to me there is no question of SE tax. He took the commission in a non-profit setting with the upfront understanding that he could not recover all his costs. Report the $16,000 on line 21 and deduct $16,000 on Schedule A.