Discussion:Farm loss
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Discussion Forum Index --> Advanced Tax Questions --> Farm loss
Discussion Forum Index --> Tax Questions --> Farm loss
| 3 February 2008 | |
| I only do a handful of Farm returns and have a question. I am working with an old hay farm that has been showing a small amount of income in resent years. The owners are pretty much retired. However, last year although there was zero income for the first time, the TP wanted to show $200 in expenses for fertilizer and gas expenses to run the slowed-down farm. This year again there is no income and he has given me the same $200 in expenses. I asked him if he expects to get any income in the fore coming years and he said probably not. Should I just drop this Farm. I don't feel comfortable doing the expenses only. Does a farm fall under the hobby rules if there is no income? | |
RoyDaleOne (talk|edits) said: | 3 February 2008 |
| Must be entered into for profit to deduct the loss. | |
| 3 February 2008 | |
| I just looked back over the last five years and counting 2007 there were 2 gain years and this will be the third loss year. | |
| 3 February 2008 | |
| The presumption in 183 where there are some profit years won't mean anything here. IRS can rebut the presumption rather easy. It's gone dormant, admitted by t/p to likely remain that way. | |
| 11 February 2008 | |
| Piggybacking on the discussion here, but I have a client in somewhat similar situation. He lives on property with about 25 acres that he plants hay and wheat. He doesn't harvest or sell any of it. He lets the neighbor harvest and keep the hay, and lets the wheat go each year. He's also bought equipment and built a barn on the property, by himself, a few years ago. He came to me this year wanting to know how to deduct it all, to offset his W2 income from his 'day job.'
Just wanting to confirm that there is nothing we can do for 2007, right? If he wants to get this operation to count, then he needs to show income received for the hay or rent or something, right? His expenses are so high, that I don't really see how he would show any profit on 20 acres of hay. Is there a choice under this situation where he could call it farm rental instead, and hope to show small income occasionally to offset years of losses. We want to avoid 'hobby loss' designation, but to me it sounds like he's throwing expenses at something he doesn't really care to profit from. Thanks for insight. I only have a few farm returns, and haven't been there for starting a farm operation before. | |
Bushmaster (talk|edits) said: | 11 February 2008 |
| Your client has nothing to deduct.
Look at it this way. I can't deduct the garage I built or my riding lawn mower or gardening expenses. He can't deduct his barn or his tractor or his planting expenses. Same principle but a a bigger scale. | |
