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EITC and losses from sales of assets


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I am not very well versed in EITC.   Taxpayer had a business that went under.   Asset repossessed resulting in a loss on the 4797.    Schedule C shows a profit, and that profit qualifies client for EITC according to ATX.  Just want to make sure this is correct.   ATX is ignoring the loss on the sale of the asset from the schedule C business.    It makes sense, because ATX is ignoring the loss for the purposes of the SE tax as well.   So it is consistent.    Just looking for some affirmation that this is correct because it just turns out that it makes a pretty big difference when that loss on the 4797 is excluded from the EITC calculation.  

BTW, there is no way this client planned it this way, it is just the way it fell out when we got the information about his tax situation.  No fraud concerns on my part.

Thanks

Tom
Modesto, CA

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