|
|
 
| Business Plan for your "horse business"... Who has one and would you share a general idea of how detailed it is. For instance, how many pages? Can it be as simple as one page?
The Oklahoma Tax Commission is asking me for one because I am applying for a "agricultural exemption permit". I have one young horse that I plan on keeping logged as a "business" endeavor. I "plan" to make a profit when I sell him, and I want to have been smart enough to at least get some tax breaks along the way.
And you Okie's who truly understand what the "agricultural exemption permit" allows, am I wasting my time trying to get one?
And yes, I know. "..to make a million dollars in the horse business, start with two million." | |
| | |
 
Location: Not Where I Want to Be | No offense, but this sounds like a disaster waiting to happen
| |
| | |
 Coyote Country Queen
Posts: 5666
 
| Do you have an accountant that helps you prepare your taxes? If so, what do they think about this? Honestly, I agree that it does sound like a disaster waiting to happen. Having 1 horse that you are going to train and sell sounds more like a hobby than a business. From what I've heard over the years, the IRS is more likely to audit a "horse business" because so many people try to claim their hobby as a business for tax purposes. If you do think you can legitimately claim this as a business, keep excellent records, all of your receipts, etc. | |
| | |
| I have discussed it with my accountant who says it is legitimate to claim your expenses if you could end up selling the horse for a profit. I found the following link that states: "Activities that consist primarily of breeding, training, showing, or racing horses are presumed carried on for profit if they produced a profit in at least 2 of the last 7 tax years, including the current year."
https://ttlc.intuit.com/questions/2338853-how-many-years-can-i-claim...
I have been around the horse business enough to know the realities of how much money is actually made/lost. I also know that if you hit on that right horse you can actually make a profit. In order to claim the deductions though, you need to be claiming them right from the beginning, correct?
This is my dilemma. I agree that it could be a total waste of time/money and never bring in one dollar of profit, BUT.... in this country it is legitimate to try. My accountant agrees. I have enough tax burden that I can afford to take this "gamble". In reality, isn't that what the horse business really is all about anyway? Shoot ALL business's are a gamble.
If a person could go back in time and claim all the expenses from the years leading up to the horse selling WITHOUT having claimed it as a business, then I wouldn't even hassle with filling as a business. I would rather NOT have to deal w/all the record keeping requirements.
I did claim my barrel racing as a business years ago. I was able to show profits 2 out of 7 years, so met the requirements. It was just recently I have been asked for a written business plan when I attempted to update my "agricultural exemption permit".
That then again leads to my question.... Is there anyone out there who trains just one or a couple of horse at a time, and claims it as a business? If so, can you give me some guidelines on how to write a "business plan"?
| |
| | |
 Take a Picture
Posts: 12838
| I guess I am among the foolish optimistic. I can't link on my phone but google HOW TO WRITE A FIVE YEAR BUSINESS PLAN. There were several things listed here. Remember it is a PLAN not chiseled in stone. Hope this helps. Good luck | |
| | |
| Thanks for the suggestion. Yes, I did a search without a lot of good results which is why I asked the question here. I seem to get some of the best suggestions on this site. I guess most horse people are as unsure what to do for a business plan as I am. The way the IRS has been getting more involved in the horse businesses, I wanted to make sure I am keeping up with industry standards. Maybe that's the issue. It seems like a blurry line. Thanks again! | |
| | |
Take a Picture
Posts: 12838
| I will get on my laptop and give you a link. We have to do these at school all the time | |
| | |
| Thank you! | |
| | |
Elite Veteran
Posts: 747
| I am an accounting major and have taken several advanced tax courses recently and currently, and I'm not following what you're talking about. I'm not sure how raising a single horse could qualify as a 'business' activity. From the requirements I learned, for an activity to be considered a business instead of a hobby, you must be profitable in 3 of 5 years. If it is a hobby, you can only deduct hobby losses/expenses to the extent of the profits generated by the hobby.
If I were you, I would look at at the cost/benefit ratio to see if pursing this 'plan' you have is feasible for you. I am not sure how you can consider this a business from what you have talked about in your post. If you did somehow get it, and you were audited by the IRS in later years, it is likely that you would owe back taxes and penalties.
I have access to a tax research database through my University and looked up some cases. There was one case where a family claimed their horse breeding and training activities as a business with the motive of profit. However, they were incurring large losses and one of the family members was working a job to subsidize these losses. The IRS got involved and deemed that since the horse breeding and training wasn't their primary 'business' and that they were holding other jobs to support the horse 'business' that it wasn't in fact a business. The family was then liable for taxes they had not paid, with interest.
The only thing I can maybe think of is if you are solely raising the horse for sale at a profit later, you may be able to deem it as an investment and the gain on sale of the horse may be eligible for preferential tax rates on the capital gain. However, I have done no research on this and am not sure if you can claim animals as investments. | |
| |
| |
Folks on-line