I was catching up on my online reading and came across an article at Cattle Today by John Alan Cohan, a tax attorney. The article discusses a recent tax court ruling on a farm that has is involved in dairy, cutting horses, and dogs.
The court allowed the deductions for the dairy cattle:
The main element that helped them win this portion of the case was the fact that they had a seven-year, professionally drafted business plan. In recent years the IRS has repeatedly denied tax deductions to farmers, ranchers and horse owners who do not have a substantive business plan. In addition, the court noted with approval that the taxpayers, with regard to the cow operations, sought to reduce expenses, had a farm manager, spent a significant amount of time of their own on the farm, had a separate checking account, and focused on a competitive breed.
However, the court found against the horses and the dog operations:
The horse activity, however, was another matter, and the court ruled that this was not conducted for profit. The taxpayers showed and bred cutting horses. There was no business plan and very little by way of books of the activity other than Schedules F on their tax returns.
The court said: “Someone with the intent to make a profit from cutting horses could be expected to have adequate information from which to analyze the expenses and to project the progress of the activity. The activity was for the most part undocumented and there was little or no interest shown in the financial aspect of the activity or its prospects.”
Check out the full article at New Tax Court Case Stresses Importance of Recordkeeping
For those planning to attend the Texas A&M Beef Cattle Short Course, be sure to attend Wednesday morning’s business session where CPAs from a tax firm specializing in agriculture will update you on the new tax laws and answer any questions.
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