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Tax Advisor’s – Answer Tax Question Of The Week!

Tax Advisors- Your Thoughts On This Question Are Appreciated

Taxpayer Question: I invested about 250 hours on a project that did not pan out and this had a huge impact on my bottom line in 2015.

For a consultant who charges an hourly rate and working as a sole proprietor, can I take a loss for work done on a project that was rejected by the client? 

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5 thoughts on “Tax Advisor’s – Answer Tax Question Of The Week!

  1. Avatar Jim Enright EA says:

    You can’t lose money that you never had.

  2. Avatar John Jones says:

    Are you a cash basis taxpayer? If you are, then no, you can’t take a loss?

  3. Avatar Barbara Aho says:

    Many Americans struggle with this concept, but the fact is, you have already taken a deduction for this loss. Notice the “huge impact on your bottom line.” Perhaps it would help to think of the year as a series of 250-hour projects. You would do 8 of them in a typical year. Now, divide all your expenses: rent, phones, supplies, etc. into the 8 projects and tally up the profits and losses of each one. You should get the same bottom line if you do it correctly, and you will see that the loss has been accounted for.

  4. There is no provision in the Code for the deduction of the value of lost time.

  5. Avatar Patrick says:

    There would be no point in claiming for lost time as opposed to claiming for redundant expenses of the project. If indeed you could by chance claim for the lost time, the amount that you claimed would have to be included in your income as money earned. The result would be a self-cancelling plus and minus.

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