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Miniature Horse farm as a Business????

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kdhminis

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Do any of you file your miniature horse farm on your taxes as a Business? If so, is your farm Inc., S Corp, LLC or something else, or none of the above (maybe it's not necessary)- and just filed under Form F on 1040? We are just beginning our miniature farm and have been told by some that as we buy horses, equipment, fertilizer, feed, vet bills, show costs, breeding costs, etc. that some items can be depriciated, etc. Our intention is to love, buy, sell, breed, show our miniature horses and enjoy them for many, many years to come.

 

albahurst

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I am thinking that in order to have minis as your business, you have to show profit at the end of 3 or 5 years??? There is some stipulation, like that anyway, to show that it is a business and not a hobby. You may best be advised to contact your CPA.

Peggy
 

dgrminis

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We keep track of everything we spend that is related to the horses and my accountant files that in as a farm type expense... We also have cattle though and they are included (on a seperate sheet).. I am really not sure what all he does but I know we are not an official business like a LLC or a Corp, etc. We are just a farm... I would say it is WELL worth looking into with an accountant as it has made a big difference for us as some things you pay tax on you get credit back for as a farm...
 

Miniv

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We file as a simple partnership, being husband and wife. Highly recommend you find an accountant who knows about farming/ranching.

We keep track of all expenses -- feed, supplies, vet, medical, etc........ even mileage to shows and show expenses. An accountant who knows his stuff is the best way to go.
 

Genie

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We file as a partnership and we are in Ontario, Canada.

Everything is documented and tax is collected on sales and submitted to the government.

Our accountant requires horse inventory annually and variances are reported.

We have been audited and thankfully have excellent accountants and my husband is very diligent with his recordkeeping..

The only thing we were not doing was a log book for the truck. When we did we found that our estimates regarding mileage and gas were too low.

Unfortunately when starting out there is little profit or often losses, however the government entertains that sort of event due to business start up.

Some years we have extra expense (in particular vet expenses due to difficulties or a loss)and that takes a toll.

When it comes to profit or business viability, in the eyes of the accountant even $1.00 is a profit.

If I was a Revenue Canada auditor I would find it quite easy to verify tax reports and disclosure when it comes to registered animals and transfers of ownerships.

I like to sleep at night.
 

targetsmom

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Our miniature horse farm is an LLC, one of 2 LLCs my husband and I are partners in. One actually makes money! We work with an accountant who is familiar with the horse business and he does all the partnership forms for us. They are not the same as the regular business © or farm forms (F). You need to run it like a business, which means good records just for starters.
 

Bess Kelly

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S Corp.......fully separated from personal. Funds input as loans, receipts, cks, business meetings, etc. Yes, you can depreciate broodmares, breeding stallions but, when sold you must also basically reclaim it as reduced value for the animal. The animals (mini horses, donks & Boer goats) were actually registered in the Corp name, also. We had excellent CPA, excellent records; some yrs loss, some years profit...but, this was after extensive advertising, travel, showing fees & trainers, full-time help at farm etc.

GOOD CPA, documented records....a must. Details of your own time dedicated to business, business plan, financial statements and all that.

15 yrs ago the economy was far, far different.
 

zoey829

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I live in NJ and my account said I had to show a profit. But others tell me thier is a way around that since you can "reamp" your business. So I dont know. I need to reinvestigate.
 

Michelle@wescofarms

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We file as a partnership (husband/wife), but I'd like to convert to a LLC, I just haven't filed the paperwork. It's best to consult a good accountant well versued in this area.

This is from the IRS website -

IRS

Business or Hobby? Answer Has Tax Implications

IRS Summertime Tax Tip 2007-13

Fishing, Gardening, Golf, Sewing, Woodworking, Horsemanship, Scrap Booking, Stamp and Coin Collecting, etc.

The IRS isn’t trying to spoil your fun but if your favorite activity makes a profit every year or so, there may be tax implications that surprise you.

What is a hobby? Hobbies, also called not-for-profit activities, are those activities that are not pursued for profit. What is a business? Generally, your activity is considered a business if it is carried on with the reasonable expectation of earning a profit.

If you are not sure whether you are running a business or simply enjoying a hobby, here are some of the factors you should consider:

Do you run the activity in a businesslike manner?

Does the time and effort you put into the activity indicate an intention to make a profit?

Do you depend on income from the activity?

If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?

Have you changed methods of operation to improve profitability?

Do you or your advisors have the knowledge needed to carry on the activity as a successful business?

Have you made a profit in similar activities in the past?

Does the activity make a profit in some years?

Can you expect to make a profit in the future from the appreciation of assets used in the activity?

An activity is usually considered a business if it makes a profit during at least three of the last five tax years, including the current year.

An exception is breeding, showing, training or racing horses. Such activity is presumed to be a business if it makes a profit during at least two of the last seven years.

If you are conducting a trade or business you may deduct your ordinary and necessary expenses. An ordinary expense is an expense that is common and accepted in your trade or business. A necessary expense is one that is appropriate for your business.

Losses from a not-for-profit activity (hobby) may not be used to offset other income. It is possible to claim some deductions for hobby activities as itemized deductions on your Form 1040 income tax return. However, there are special rules and limits to the deductions you can claim, and those deductions may not exceed the gross income from your hobby.

Still confused? More information is available at IRS.gov. A good resource is Publication 535, Business Expenses, found on the web site or by calling 800-TAX-FORM (800-829-3676).

Links:

IRS Publication 535, Business Expenses
 

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