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MamaEssie
Tax Payer
Posts: 1
(3/20/05 1:04 am)


 discounted personal services
My sister works as a massage therapist. As part of her advertising she holds frequent contests with the prize being a free first massage. Can she count the lost income as an advertising expense?? Or is there any other way we can use this to improve her tax situation? TIA

Downpuppy 
Tax Payer
Posts: 23
(3/20/05 7:56 pm)


 Re: discounted personal services
No, only actual expenses are deductible. You start thinking about lost income, then you start thinking about decalring all the income that she could have earned if she didnt eat or sleep, and pretty soon you're nuts.

bmcper 
CEO/Auditor
Posts: 320
(3/20/05 8:26 pm)


 Re: discounted personal services
Sorry Downpuppy but you are wrong on this one. Actually, this is a legal expense. All monies spent surrounding the contest plus the cost of the massage can be deducted against gross income.

Edited by: bmcper  at: 3/20/05 8:28 pm
MamaEssie
Tax Payer
Posts: 2
(3/21/05 11:18 am)


 Re: discounted personal services
Cool! Can you tell me what IRS publication discusses this or where in the tax code? Do we count it as advertising expense or something else?

Downpuppy 
Tax Payer
Posts: 24
(3/21/05 9:35 pm)


 Re: discounted personal services
All monies spent are indeed deductible. "Lost income" is a fictional number. I've only run into one person who ever tried to deduct it. He was an architect who took the hours he spent developing bids that didnt sell, multipled them by his billing rate, and then deducted it.

He was a bright enough guy, but trying to explain that foregone income is not the same as an expense still took some work.

bmcper 
CEO/Auditor
Posts: 321
(3/24/05 9:31 pm)


 Re: discounted personal services
This does not come under "lost income" but rather under donated services. There is a contest connected to this scenario.

Downpuppy 
Tax Payer
Posts: 25
(3/25/05 8:09 pm)


 Re: discounted personal services
Since you have no basis in a service, there is no deduction. Its a pretty fundamental rule, the reason wages are income.

Arthur Rubin 
Tax Payer
Posts: 78
(4/2/05 2:16 pm)


 Re: discounted personal services
I don't check back here very often -- but Downpuppy is absolutely correct. No income, no deduction.

The cost of the contest should still be deductible as an advertising expense.

bmcper 
CEO/Auditor
Posts: 322
(4/12/05 10:11 pm)


 Re: discounted personal services
This is one of those times when you need an accounting degree.

MamaEssie
Tax Payer
Posts: 3
(4/13/05 1:28 am)


 Re: discounted personal services
Funny...I have an accounting degree and it hasn't helped me with this one. Unfortunately since no one here could provide any documentation one way or the other, we are only claiming the cash outlays for contest expenses.

Arthur Rubin 
Tax Payer
Posts: 79
(4/20/05 6:58 pm)


 Re: discounted personal services
This is one of the (many) times the board operator needs some continuing education in taxation. An accounting degree, or a CPA, is apparently not sufficient.

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