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Hobby Farm?

Bernard

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In a post (somewhere) on this site someone alluded to the distinction the IRS may make between someone with small acreage / few cattle (hobby) versus a larger enterprise which presumeably qualifies as a for-profit business. And, the implication was that tax issues were involved and that a consultant should be employed. Is this a legitimate concern for someone who has plans for an initial small startup? Is there a break point, baseline or formula that determines which is which? And finally, if I do need to "consult", are the tax issues basic or do I need to find someone who specializes in Agribusiness?

Long, complicated post, I know. Sorry.
 

jfont

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I ONLY HAVE A FEW HEAD , BUT MY HOME OWNERS INSURANCE WOULDN'T COVER THEM IF THEY WERE TO GET OUT AND GET HIT IN THE ROAD. FARM BEUREAU INS. TOLD ME ANYTHING THAT I RAISED THAT WOULD EXCEDE MY OWN CONSUMPTION WOULD BE CONSIDERED A BUISINESS. SO I BOUGHT A FARM LIABILITY POLICY AND STARTED DEDUCTING MY ANIMALS ON MY TAXES AS A SUPLIMENTARY INCOME.
I REPORT MY INCOME ON THE FOUR CALVES I SELL A YEAR AND THE EXPENSES TO RAISE THEM. MY TAX GUY SAYS IT'S LEGITAMENT.
CHECK WITH A CPA TO SEE IF YOU QUALIFY.
 
A

Anonymous

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If every audited by the IRS your burden of proof would be intent. Are you trying to make money or just in it for fun? Also, if you show a loss for a certain number of years (used to be 3 years) the IRS can disqualify the losses. The size of your operation has nothing to do with the business aspect. I would highly recommend keeping good records. For a small operation you do not need an Agri CPA. Usually you deduct the purchase price of livestock in the year of sale.
 
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