<p>You can get very creative on your taxes to create paper losses…I imagine those are the types of things that may get added back in and most likely a good sized chunk of the OP’s $300,000 loss is paper loss like depreciation, expenses, etc. Thumper’s example of 10% of the heating bill is a perfect example. You need to heat the entire house whether or not your business is located there. The government lets you allocate some of those reclassifications of household expenses as business expenses but some colleges might not allow that. If I had an office in my home that took 10% of the space i’d probably use 10% of my heat, 10% of my electric, 10% of my garbage and so on and so forth to offset business income in a heartbeat. I’d track every single penny I spent and allocate an acceptable portion of every acceptable expense and depreciate every single piece of equipment, etc., that I could legally get by with as “business related.”</p>
<p>There’s a world of difference what a private college can do with the financial information you give them when you are looking for a financial handout and what you can do with our federal government when you are looking for a reduction in your tax bill. The two aren’t comparable. Doesn’t make anyone "anti-business’ as mom2 points out.</p>