Equine Tax Law

IRS Manual Reveals Attitude Toward Industry

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The IRS Manual has a section in the Audit Technique Guide entitled “IRC Section 183: Farm Hobby Losses With Cattle Operations and Horse Activities.”  The guide is intended for to alert IRS auditors to situations pertaining to the horse and cattle industries.  The guide says that “Current trends indicate that these two activities, due to their nature, contain certain opportunities for taxpayer abuse.”

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Protecting Your Kids and Their Horses

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The bond between a child and their horse is one of the most special and important relationships that they will have in their lives. Horses are wonderful teachers, and they also provide structure and important lessons in responsibility and accountability. Any child that is fortunate enough to have a horse will be forever changed by the experience. Often the horse is the child’s best friend and most important source of growth, confidence, and fun.

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THE IRS’S MISGUIDED APPROACH TO “RECOUPMENT”

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For any business, long-term profit potential may hinge, in some measure, on efforts to reduce costs, getting better prices for goods and services, consolidating operations, layoffs, or efforts to promote efficiency.

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Tax Court Case Involving Cow Activity and Horse Activity

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The outcome of cases in Tax Court depend somewhat on the philosophical approach of the individual judge hearing the case. Some judges are more sympathetic than others to losses incurred by taxpayers in the horse and livestock industries.

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Unrealized Appreciation Farmland Value

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Appreciation in value of a taxpayer’s farm or ranch property is often a significant issue in the context of the hobby loss rule.  Although a “reasonable” expectation of profit is not required, the profit objective must be bona fide.  It is the expectation of gain, and not the gain itself, which matters.

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