We all know the old adage, "Those who can't teach." In this case, it should be "Those who can't audit."
In DARRYL F. ROYSTER, v. IRS, the taxpayer, an IRS employee (he wasn’t actually an auditor, instead he was a computer equipment analyst/information technology specialist) seemingly had a heart of gold and wanted to start a basketball school/ motivational business for kids in urban Chicago.
The challenge is that he took a number of business deductions for the ”business”, a “business” that ran losses of $20K, give or take a few thousand, for every year over a 3 year period. Evidently he didn’t charge his students fees to attend his school.
Can’t say this enough. If you want to have a business respected by the IRS, you have to treat it as such yourself.
Would a non related investor be happy with, and invest in a business that generated losses of 20K a year? A business that didn’t charge its clients a fee for its services?
Probably not. Thus the business deductions were disallowed.
