Tax Time Tips for Livestock Owners
by: John Alan Cohan, Attorney at Law
Cattle Today
Many people who own livestock farms are full-time professionals in non-farming fields–doctors, for instance. The IRS often enough will assess deficiencies against these individuals based on the idea that the activity is simply a means of generating tax write-offs.
The IRS might argue that, given your full-time day job, you don’t have much time to manage the operations. According to numerous Tax Court cases, working on the farm only on weekends and holidays is not enough time to devote to a cattle or other livestock venture unless you have a qualified farm manager whom you supervise during your absence. Hiring a qualified farm manager is evidence that you are conducting your farm as a business, particularly if you personally only can devote a minimal amount of time to the activity.
In addition, according to recent Tax Court cases, one of the most important elements in withstanding IRS scrutiny is to have some type of plan–a business plan–in which you set forth in writing how and when you expect to make a profit from the venture.
It is important, as well, to maintain herd inventory records on each animal, including parentage, birth date, birth weight, and registration or other identification number. The growth of the size of your herd is evidence that you are engaged in a business rather than a hobby.
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