How do I properly handle a business that is taking a loss for too many years?

[muddler]

I have kept my license active as a Realtor since June of 2015.  I generally use it to help my wife out who is also a Realtor when she gets busy, but have hoped to generate my own income at the same time.  I have reported and claimed a loss for year 2015 and year 2016.  I am reluctant to continue claiming a loss for 2017 even though I still work as a Realtor and cannot show a profit 3 of the last 5 years. My questions:

1. Can I discontinue business for 2017 since I don't have profit to report, even though I still have active license with expenses? I just don't want to claim them anymore since the profit part hasn't worked out.

2. Do I delete the business or leave it in Turbo Tax with just a 0 showing?

3. I plan to again show that I am a Realtor in my taxes in the future whenever I can show that I have a profit.  Does that seem like an appropriate way to handle my business going forward?  I imagine I should handle my expenses going forward as a hobby until I can show a profit since 3 of the last 5 years, I have not been able to do that.  I wish there was a way to link my expenses to my wife's business, but I don't know how to do that.

Thanks for your help

[CathiM · Accepted solution]

Showing a loss for 3 years in a row could put you at risk for a hobby loss audit.  If you are actively trying to sell real estate and are operating like a business, but just haven't made any sales, you may prevail in an audit if you have all your documentation in order. It is understandable that you do not want to risk getting audited though. 

You can leave the business in TurboTax with $0 income and $0 expenses, but if you are depreciating a vehicle or other assets, these will show up on Schedule C under depreciation expense.  It would be best to "dispose" of those assets, in TurboTax. You will choose "converted the assets to personal use". 

Answer "yes" to the Special Handling question (you converted the asset to 100% personal use). When you convert an asset to personal use, there is no gain to report. However, you must report any section 179 recapture this year. A section 179 deduction is subject to recapture if you converted the asset to personal use before the end of its depreciable life.

If you choose to, you can delete your entire Schedule C this way:

1. Go into Forms mode by clicking "Forms" in the top right corner
2. Scroll through the forms in your return
   
3. Select "schedule c"
4. Select "delete form" box at the bottom of the screen

You can include your expenses on your wife's Schedule C only if she "pays the expenses".  She just needs to keep business receipts to show that her business paid the expenses.

[muddler]

Thanks for the reply.  I will go through those details on my return.  We pay our expenses on a joint credit card, so I'm not sure that would prove payment directly from her business independently. Of course, we do keep our receipts.  Thanks again.

[CathiM]

Yes, a joint personal credit card can be used to pay for her business expenses.

[muddler]

So it sounds like it is possible for me to put my real estate expenses paid by our joint credit card onto her Schedule C since I use those expenses to support her business (which really makes it her business expense I guess).  Does this sound correct?  I thought I would have to become a paid assistant or something like that to make this possible.  I appreciate your patience and willingness to stay with me on this topic.

[MichaelDMiller]

I am trying to close out a schedule c for photography and convert the assets to personal use.

The only things on the 4562 are sale, abandonment, and something else. They generate loses for some of my assets, which I don't want to take.

Question does not exist. I went through the step by step and never saw that question.

Answer "yes" to the Special Handling question (you converted the asset to 100% personal use).

Your solution.

but if you are depreciating a vehicle or other assets, these will show up on Schedule C under depreciation expense.  It would be best to "dispose" of those assets, in TurboTax. You will choose "converted the assets to personal use". 

Answer "yes" to the Special Handling question (you converted the asset to 100% personal use). When you convert an asset to personal use, there is no gain to report.

[SusanY1]

The instructions refer to a prior year program (the date of the post is a bit misleading due to a data migration.)  In the current version of TurboTax to indicate that you have converted the property to personal use edit the asset in the asset section of the program, rather than entering it as a disposition. 

On one of the asset screens you should have the option to indicate it was converted for personal use.  The screen will look similar to this: