Discussion:Business start...
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Halfmile200 (talk|edits) said: | 14 May 2007 |
| When exactly is a farmer's business considered open? I contend it is when they purchase the equipment to start the undertaking, that means all expenses are just that, expenses. My partner says it is when the first sale is made such as grain harvested, hay sold, livestock sold, etc. and all purchases up to that point are expenditures that need to be capitalized as start-up exp. Any reference would be greatly appreciated, I have scoured the IRS website and this site and have found nothing so far. | |
| 14 May 2007 | |
| That's a good question Halfmile -- one for which there's a lot of disagreement. Not sure how it is in the farming industry. But I'm leaning more towards your partner's definition of when client is "carrying on" a trade/business. In the first month of sale, there's an objective event demonstrating he really is "in business" and selling what he purports to produce. I don't think just buying equipment alone would be considered the start of carrying on a business. But maybe there are unique circumstances in farming? | |
Chautauqua (talk|edits) said: | 14 May 2007 |
| With certain crops (fruit trees?) it could be many years before there is any income. Not equitable to the farmer if he cannot deduct ordinary expenses for this period of time. | |
| 14 May 2007 | |
| I would say when the first crops are planted or the livestock is purchased & on location. | |
| 20 May 2007 | |
| Sec. 195(c)(2)
"(2)Beginning of trade or business (A) In general
Except as provided in subparagraph (B), the determination of
when an active trade or business begins shall be made in
accordance with such regulations as the Secretary may
prescribe."
I could not find any regulations other than Reg. 1.195-1 Election to amortize start-up expenditures that doesn't really apply. Court cases use the start of revenue-generating operations as the time of the beginning of business. The controlling case is Richmond Television Corporation v. U.S., 345 F.2d 901 (CA-4 1965)] As for when revenue-producing operations have commenced for your farming business, my guess is that it would be when seeds or trees are planted, when livestock is bought for breeding, for milking or for sale, etc. Also, see Chapter 7 in Publication 225, Farmer's Tax Guide. | |
