Run Cattle Ranches as a Business to Avoid IRS Scrutiny
by: John Alan Cohan, Attorney at Law
In hobby loss audits, the IRS sometimes views various types of ranching activities as a means of generating tax losses, rather than as a profit-oriented venture. Many cases that have ruled in favor of the taxpayer in livestock and other ranching activities involve people who developed a superior line of animal. Taking a scientific approach to breeding is evidence showing a businesslike approach to the activity.
Careful research into pedigrees, for example, shows a concern for the proper application of genetics to your breeding program. Working with experts to develop a superior nutritional program is also evidence that you are using scientific means to enhance or at least maintain the health of your animals, and this in turn suggests you are operating a business rather than a hobby.