Combine income and expenses of 2 buisinesses

[crevitch]

My son gets 1099 income as a musician and a video editor.  The music expenses far exceed his income.  Can he combine the two businesses into one (just sole proprietor) and offset the video income with the music expenses? 

[Anonymous_ · Accepted solution]

If there is more than one business, the owner (sole proprietor) must prepare a separate Schedule C for each business.

See https://www.irs.gov/instructions/i1040sc#en_US_2021_publink24329wd0e493

A net loss in one (Schedule C) business will offset a net profit in any other business, regardless.

[crevitch]

Thank you.

[Mike9241]

Separate reporting is required.   the issue with the music business is if there are losses year after year.    at some point, the IRS could disallow the music losses because of the hobby loss rules.

hobby losses irc 183

(d)Presumption

If the gross income derived from an activity for 3 or more of the taxable years in the period of 5 consecutive taxable years which ends with the taxable year exceeds the deductions attributable to such activity (determined without regard to whether or not such activity is engaged in for profit), then, unless the Secretary establishes to the contrary, such activity shall be presumed for purposes of this chapter for such taxable year to be an activity engaged in for profit. 

[Anonymous_]

If you are going to inject the hobby loss rules into the discussion, the factors to be considered (per Treas. Reg. §1.183-2(b)) might as well be posted:

1. the manner in which the taxpayer carried on the activity,
2. the expertise of the taxpayer or his or her advisers,
3. the time and effort expended by the taxpayer in carrying on the activity,
4. the expectation that the assets used in the activity may appreciate in value,
5. the success of the taxpayer in carrying on other similar or dissimilar activities,
6. the taxpayer’s history of income or loss with respect to the activity,
7. the amount of occasional profits, if any, which are earned,
8. the financial status of the taxpayer, and
9. elements of personal pleasure or recreation.