Quote Originally Posted by DWThomas View Post
En-n-n-nh, anyone considering this might want to study the fine print. I am not a tax wizard, I don't even pretend to be, but I did make some side money as a sole proprietorship decades ago. I seem to recall there are some guidelines to differentiate between a business and a hobby and it involves showing some profit at least occasionally to be considered a business, just to prevent folks doing as you describe. Of course, as a practical matter, you might get away with it, not because it's legal but because they don't have time and manpower to pursue nickel and dime stuff.

Just my 1.53 after tax cents
It is perfectly legitimate to lose money in a business, or to have expenses in failing to get one started. Just fill it all out on Schedule C and follow all the rules as laid out in the Sch. C instructions regarding "material participation" and you'll be fine. But you are correct that the IRS is not in the business of supporting hobbies and one must make sure to properly qualify as a business activity. I am not suggesting abuse of the rules or operating outside the law, merely exploitation of existing law.