Child modeling expenses

[David]

Client heard about being able to deduct up to $6K expenses per year for each family member (their baby) who is a model for ads or social media images. I haven't discussed this with the client yet because I want to get some cites or other backup information before getting back to him.

Years ago I picked up a new client whose previous tax preparer allowed him to write off around $10K each year for expenses traveling to different venues to get their kids in to modeling shows. No income was ever received. There was a tax court case that specifically addressed this situation and the ruling was that the expenses couldn't be deducted. I can't find this case and none of my "child modeling" keyword searches in my tax research program produce any results.

I would think that no expenses would be deductible until revenue is received for the baby's "business". Maybe these expenses could be accrued and treated as start-up costs in the year the baby actually receives income from modeling?

Before I tell the client no, I want to check with any of you who may know of cites that specifically address this situation.

Thanks.

 

[schirallicpa]

The first question is - does this have business intent?  You remember the questions:

Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.

Whether the time and effort you put into the activity indicate you intend to make it profitable.

Whether you depend on income from the activity for your livelihood.

Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).

Whether you change your methods of operation in an attempt to improve profitability.

Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.

Whether you were successful in making a profit in similar activities in the past.

Whether the activity makes a profit in some years and how much profit it makes.

Whether you can expect to make a future profit from the appreciation of the assets used in the activity.

[DANRVAN]

On 1/21/2020 at 11:26 AM, David said:

Client heard about being able to deduct up to $6K expenses per year for each family member

No way.   The income and expenses of a child are reported on the child's return, not the parent's.

Where did they "hear" this?  Coffee shop, barber shop, standing in a check out line at.......??????

[David]

As usual, they heard it from a friend whose tax preparer lets them claim the value of their baby's photo, etc. - what they say it's worth. 

So I had to be the bad guy and tell my client no.

Thanks for your help.

[Margaret CPA in OH]

David, at times most of us have had to be the bearer of bad news to clients.  Year after year I had to remind a firefighter about how there were no deductions on house meals and dues.  Every year I had to pull out Rev. Rul. 56-49 and commiserate that I would not deduct them even though 'everyone else does.'  Such is the burden we bear.....