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Well, his tax preparer did anyways... I always shake my head at the commercials that sell tax preparation by guaranteeing that they can get you the largest return.
There is a fine line between hobby income and business (or farming) income. For any given tax year, the tax returns for each can look exactly the same on paper, but the difference is in the intentions of the taxpayer over successive years. If your intentions are to use an unprofitable hobby as a tax write-off and do it year after year, the IRS will eventually have a problem with it. If you are running a legitimate business, but post losses due to start-up costs or a few bad years, they are okay with that, but you are expected to post a profit for three of the last five years (there are some exceptions to this).
In this case, this individual year's tax return could look perfectly legitimate, a taxpayer posting losses for a start-up farming business that he is developing, but if he has no intentions of developing it into a business and successive tax returns do not prove that out, the IRS may come knocking.
Well, his tax preparer did anyways... I always shake my head at the commercials that sell tax preparation by guaranteeing that they can get you the largest return.
There is a fine line between hobby income and business (or farming) income. For any given tax year, the tax returns for each can look exactly the same on paper, but the difference is in the intentions of the taxpayer over successive years. If your intentions are to use an unprofitable hobby as a tax write-off and do it year after year, the IRS will eventually have a problem with it. If you are running a legitimate business, but post losses due to start-up costs or a few bad years, they are okay with that, but you are expected to post a profit for three of the last five years (there are some exceptions to this).
In this case, this individual year's tax return could look perfectly legitimate, a taxpayer posting losses for a start-up farming business that he is developing, but if he has no intentions of developing it into a business and successive tax returns do not prove that out, the IRS may come knocking.
Our CPA is a straight arrow guy and does many much larger farm returns than ours every year, not to mention other business returns. Sorry you've not had good experiances with the CPAs you've dealt with.
I'm sure most are, I wasn't trying to paint them with a broad brush, but then again I don't necessarily find all of them to be above reproach.
I'm sure most are, I wasn't trying to paint them with a broad brush, but then again I don't necessarily find all of them to be above reproach.
