Discussion:Dog trainer and IRS Audit
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Discussion Forum Index --> Tax Questions --> Dog trainer and IRS Audit
| 28 January 2008 | |
| My client is being audited, she is a dog trainer/breeder. First the IRS disallowed her cell phone, which is basically how clients contact her, but now they want to disallow the dog show entry fees and dog supplies including food.
Her defense is that when she shows the dogs, she is actually advertising her business as to how she trains the dogs and gets new clients. Since the dogs are her business why wouldn't let her deduct the food for the dogs? She takes her dogs to schools, libraries for demonstrations, which again she picks up new clients. All the other trainers in her field take these deductions. Has anyone have an idea on how she can state her case to deduct these expenses. | |
| 28 January 2008 | |
| should we assume that she only deducted the portion of her cell phone bill that related to the dog business?
Does she treat the dogs as pets or as livestock? | |
Kerryfreeman@sbcglobal.net (talk|edits) said: | 28 January 2008 |
| My thought is if she is showing other peoples dogs it would be allowed. If it her own pet then it might be considered a hobby.It is alway hard to use personal property to show case business. Example: the car painter that custom paints his wifes pt cruiser and them takes it to pt raillies.It does not meet the smell test. I just look fishy.
The phone sould be easier, take a look at the bill, is this the phone # on business card and contracts. Can she show business use. Kevinh5 ratio idea might be a good middle ground. | |
| 28 January 2008 | |
| Since a cell phone is listed property, technically, the deduction is disallowed unless the taxpayer can produce a usage log proving the percentage of business use. | |
| 28 January 2008 | |
| Similiar client. Farrier. Insists his own horse is important means of obtaining business since it keeps him in horsey set. | |
| 28 January 2008 | |
| My daughter's a farrier. I don't think she claims her own horses as business expenses. Maybe I should suggest it <G>. | |
Death&Taxes (talk|edits) said: | 28 January 2008 |
| This is not quite the same, but read http://www.ustaxcourt.gov/InOpHistoric/Topping.TCM.WPD.pdf since she designed barns etc | |
| 28 January 2008 | |
| Go to appeals. They are more reasonable. This auditor seems to to be difficult.. | |
| 29 January 2008 | |
| Left on my discussion page:
lets say she does treat them as livestock, they live in the kennel. For the show expenses, by winning the awards for the training promotes her business, also this help with the breeding of her dogs. The breed is dobermans. The shows are not like the regular akc best in show for that breed. To me the more she shows her training techniques at these shows, her business will grow. Also, what if she shows her clients dogs? I assume the IRS will let her deduct those show expenses. Thanks for your help, I think the IRS agent is being a little picky, the cell bill she denied was for only $500.00, but the show and supplies including food is about $5,000.00. Please help with any ideas to present her case. Thanks again. | |
| 29 January 2008 | |
| I would show exactly what you are trying to prove: that she gets business from meeting people interested in her dogs/services and she feels that the best way to meet these people is by showing dogs.
does she have brochures showing awards "best of show" etc? Does she have a trade show booth or display? What does she do at the shows to get business? | |
Death&Taxes (talk|edits) said: | 29 January 2008 |
| I would have her gathering newspaper clippings mentioning her successes in shows....these should be on her walls in her place of business anyway. What would really be helpful is any articles written for publication. Memberships in professional organizations can help; a client with race horses impressed IRS by his being president of some horseowners' association. Do read that case, or at least the first ten pages or so of it, for Tracey Topping used her 16 year old horse in shows to interest wealthy potential clients to design barns. Tax Court approved this most indirect link to obtaining business; here you are directly showing your potential clients what you can do.
This is not on the same thought plain, but many years ago my lawyer boss tried a home office case. He lost the case, but another man who'd petitioned Tax Court pro se and was docketed for the same session watched the proceedings and hired my boss. | |
Donniecastleman (talk|edits) said: | 29 January 2008 |
| At my one audit, the auditor was fine with taking a percentage of cellphone expenses, as long as it wasn't the whole amount, we did 75%. | |
| 30 January 2008 | |
| I have a similar situation. My client trains and shows jumpers (horses). He would purchase a horse, show it, and then sell it. Then the economy started to tighten up and he couldn't sell as many horses as he needed to survive. Someone suggested he try to get clients to come and train with him (meaning he coaches them on their horses).
To attract clients, he had to go to horse shows with a grand prix jumper. He needed to win, so he needed to be consistently on the same horse (hard to win if you change horses every time!). He chose his flashiest and best horse to show. The horse is a stallion, difficult to ride, and couldn't sell anyway. He started out the year with zero clients. This year, he has 9 -- all of them showing not only at the State level, but even at the national level. And winning. He still takes his horse to the shows to demonstrate his riding skills. And the tactic is working. He gets calls every month now. People are even sending their horses from Florida and California to him to train. I was actually at a loss for how to account for the horse he kept for marketing purposes, as we have historically capitalized the horses in training and then offset those costs against his income. But now I see his point, as I watch his business grow. Additionally the horse is not going to sell as it has problems. BTW, the business is his sole source of income. You didn't mention if your person had another line of work. | |
