the IRS auditor told us, and our acct too. in seven years, you are 'suppose' to show a profit two years during that time. !!!!!!!!!!!!!!!!!BUT!!!!!!!!!!!!!!! if you can show you have legitimately ran and are running a business, you do not have to have a profit...... some criteria- a registered business name with the state, a separate checking acct with biz name because ALL of your funds travel thru this for biz only, a separate credit card for biz purchases only. there are , i think , like 4 or 7 things to do/ to show the IRS you are running a business. So your acct needs to go back and read the horse biz laws because he/ or she is wrong. we are into our 7th year, no profit and no problem, because we can meet/ prove we have attempted to run the business legitimately and meet the criteria the IRS has required. few things I remember being said, profits on selling horses is not taxed for the first 750,000 and no tax either for the first 750,000 made on foals either, or it was 500,000, but who makes that? not me!!! oh and the auditor told us a miniature/ horse business rarely gets audited if the biz is under the 999,999 level. well I dont see me at that level with my minis anytime soon.