As you may know, the Internal Revenue Service (IRS) is now known to take a closer look at cattle ranches to determine if they are really being operated as a profit-oriented business or just as a way to generate losses.
John Alan Cohen, a lawyer who is experienced with in the livestock, farming and horse industries, recently wrote about a IRS decision where it was decided that the producer had not fulfilled the basic requirements the IRS looks for with for-profit ventures.
Cohen says:
The key point of this case is that livestock and other farming ventures should be operated basically in the same way as other businesses, utilizing business principles and judgment in decision-making, and maintaining appropriate books and records. It’s important to have advance and ongoing planning, not only with a view toward profitability, but to provide documentary evidence proving that it is your intention to make a profit, even if profits are not forthcoming.
Read the article “Criteria for Operating a Livestock Farm as a Business“
Excellent article! Hopefully the lessons I learned here will prevent us from having an IRS agent showing up on my doorstep! Furthermore, I would be interested in any articles that discuss collusion between cattle auction houses and “large cattle buyers”!
I recently experienced the sting of a local auction house selling my calves well below market value to these large cattle buyers.
Thanks a bunch,
Chris G.