Discussion:Hobby-Horses
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Discussion Forum Index --> Advanced Tax Questions --> Hobby-Horses
Discussion Forum Index --> Tax Questions --> Hobby-Horses
| 7 March 2008 | |
| Taxpayer has horse racing income and horse sale income. The horse sale income is for (1)horses bred and raised . . then sold, and (2) horses purchased and sold. The horses bred and raised were for racing or to be raced. One of the horses was a yearling, one was over 2 years old.
Under the hobby rules, do you think that the sale of horses go on page 1 of the 1040 or schedule D? If on schedule D, do I deduct on Schedule A expenses equal to both the racing income and the Schedule D gains? Or just the racing income? Also, if another one of the horses was bought and sold at a losss, I assume there is nothing to report since a loss? | |
| 7 March 2008 | |
| I know I have heard this discussed before - if not here then in CPE somewhere. If I recall, the horse race & breeding industry does not & cannot fall unter the 2/5 hobby loss rule provision. That is not the only test for hobby vs business & the nature of the industry prevails in this type of business. I would look for a publication on farms as a place to start. | |
| 7 March 2008 | |
| eckert,
are you saying that this was a hobby and he didn't intend to make a profit or are you asking if this is a hobby loss. Either way I would net the two items since they were both involving the same hobby and hobby loss just means that you can't go negative for the activity. | |
| 7 March 2008 | |
| Whether or not you have a hobby loss depends on factors listed in the Regulations. Never automatically assume any business effort is a hobby. Hobby loss rules are restrictive, you should always know what you are doing in this area. The fact that you start out calling this a hobby communicates you are not aware. Go to the yellow box to the left, type in hobby loss, race horses, whatever, and you will find very informative discussions on this very thing in the last few months. Hobby loss rules have absolutely no impact on where you report items of income. | |
| 7 March 2008 | |
| We are going the hobby route. Just need thoughts on my question as how to report.
Racing 100 (page 1 1040) Cap Gain 200 (schedule d) ???? expenses 300 (schedule a) OR Racing 100 (page 1 1040) Cap Gain 200 (schedule d) ???? expenses 100 (schedule a) | |
| 7 March 2008 | |
| OK.
How to report can be found by using the yellow box as mentioned above(Kevin5 some help here please), or going to IRS.gov, or just about any number of places. | |
| 7 March 2008 | |
| It does matter where you report, because you might get capital gain rates for part of the income. | |
| 10 March 2008 | |
| The real issue here is whether there is more than one activity. It appears to me that under the regs, there is only one activity. See Reg. ยง 1.183- 1(d)(1). Also see Lawrence T. Hoyle Jr. v. Commissioner, TC Memo 1994-592. Thus, I recommend deducting $300 on Sch. A. | |
| 10 March 2008 | |
| Here is another link
I could see myself siding with CalifCPA Good Luck TexCPA 22:01, 9 March 2008 (CDT) | |
| 10 March 2008 | |
| Do you agree that the cap gain income will be reported on schedule d, with enough expenses deducted on schedule a to offset both the page 1 income and the schedule d income? | |
