The Case of the Struggling Artist

The creative life isn't easy. We've all heard stories of starving writers and artists and musicians living in garrets as they try to earn a few pennies from their chosen profession. Year after year after year of hard work without a profit.

But they might have a tax deduction.

Last month I discussed the case of the traveling food critic who couldn't deduct excess writing expenses because his actions showed he wasn't writing to make a profit. But what if he had been and was just unsuccessful?

Consider the case of the struggling artist.

Gloria Churchman trained as an artist and pursued her art regularly and continuously for twenty years. During that time she taught art classes, created paintings and sculptures in a home studio built for that purpose, and kept records of her sales and expenses.

Churchman exhibited her paintings and sculptures at least once a year. She visited commercial art galleries to solicit shows and maintained a mailing list for announcing them. At one point she even opened her own gallery to showcase her work. She also reproduced her art as posters and in books in order to make it more available to the public.

Although Churchman had some income from her artistic activities, she did not have a single profitable year. Yet, in spite of twenty years of losses, the tax judge looked at all the facts and decided that Churchman's art was her business, not her hobby.

Like Maurice Dreicer in last month's post, Churchman spent twenty years incurring expenses that exceeded her income. So why were the results different?

Churchman worked hard at her craft and tried to make money from it, while Dreicer ate his way across several continents looking for ways to spend his inheritance.

Hard work doesn't always result in publication or profits, but it can get you a tax deduction.

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Tax season is over, so stay tuned for a change of subject in next month's post on the case of the sneaky cook.

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Kathryn Page Camp is a licensed attorney and full-time writer. Her new book, Writers in Wonderland: Keeping Your Words Legal (KP/PK Publishing 2013), will be available from Amazon on May 1 and is coming soon from other retailers. Kathryn is also the author of In God We Trust: How the Supreme Court's First Amendment Decisions Affect Organized Religion (FaithWalk Publishing 2006) and numerous articles. You can learn more about Kathryn at www.kathrynpagecamp.com.

The Case of the Traveling Food Critic

Such a deal.Travel around the world staying at the best hotels and eating at the best restaurants, all in search of the perfect steak--and a tax write-off.

But the IRS didn't buy Maurice Dreicer's argument. It couldn't buy his book, either, because Dreicer never got it published.

Still, failure to find a publisher isn't fatal. So why did Dreicer lose his case?

The facts give us some clues.

Sometime in the mid 1950s, Dreicer decided to write a book about searching for the perfect steak. During the next twenty-plus years, he lived on his inheritance and traveled all over the world with his secretary gathering material for the book. They stayed in the finest hotels, dined in the finest restaurants, and returned to some cities more than once.

After writing what Dreicer called his completed draft (but which apparently had some parts still in outline form), he sent it to one publisher and one agent. When they rejected it, he stopped trying to get the book published.

He put greater effort into trying to deduct travel expenses and his secretary's salary. The tax court judge rejected Dreicer's claim that writing was his business, but it took two appeals before Dreicer gave up.

The tax laws allow writers to deduct excess writing expenses if they are writing to make a profit. You don't have to succeed, but you do have to try. The profit motive shows that writing is your business rather than your hobby.

And note the word "profit." The higher your expenses, the more money you have to try to make. Even if Dreicer had gotten the book published, the effort required to recoup twenty years of travel and secretarial expenses is daunting.

This intent is the basic test. Unfortunately, the IRS and the courts aren't going to take the taxpayer's word. They look for objective evidence that the writer's activities are consistent with a profit motive.

Dreicer claimed that he intended to make a profit, but his actions didn't show it. Although he kept meticulous records, he didn't bother to prepare a polished manuscript and made minimal efforts to sell what he did write.

So it's no wonder the judge didn't believe Dreicer's claim that writing was his business.

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For a tax case with a different result, stay tuned for next month's post on the case of the struggling artist.

Kathryn Page Camp