marksmu":2yjsx79t said:
Vett - that is the BEST "NOT" tax advice I have ever seen on an internet forum.
I am saving that for future use. I am going to have a heck of a mess of a tax problem in the next few years, as I am getting started and my start up goals do not include profit in years 1-5...Since I dont need to take money out, I intend to use the money for expansion....I've been talking with my CPA, but he swears up and down I will be a hobby farm if I dont show a profit in 2/5 years, even if I am trying to expand.
Again, Not tax advise.
Tell you CPA to get out Publication 225, Farmers Tax Guide, and read it then read it again. ;-)
http://www.irs.gov/pub/irs-pdf/p225.pdf
Page 26 Losses From Operating a Farming
* he needs to understand "at risk"
You are at risk in any activity for:
1. the money and adjusted basis of property you contribute to the activity
* he needs to understand "passive activity limits"
A passive activity is generally any activity involving the conduct of any trade or business in which you do not materially participate.
You seem to have no problem making the "at risk" portion of this.
Not For Profit Farming
In determining whether you are carrying on your farming activity for profit,
all facts are taken into account. No one factor alone is decisive. Among the facts to consider are whether: (just a few)
You operate your farm in a businesslike manner.
The time and effort you spend on farming indicates you
intend to make it profitable
Your losses are due to circumstances beyond your control
or are normal in the start-up phase of farming.
You or you advisers have the knowledge needed to carry on the farming activity as a successful business.
You can expect to make a future profit from the appreciation of the assets used in the farming activity.
Once your CPA grasps these concepts you shouldn't have a problem.