Lease Managers and/or CPA's - Question

[Tx625]

Preventing your business from being classified as a hobby

Running a hobby as a business could very possibly trigger an IRS audit. If your business is legitimate, keeping accurate and extensive records could help prevent the classification of your business as a hobby.

In addition to demonstrating your professional approach to your business, records and receipts can help document your profit motive. A written business plan is often a prerequisite for indicating an intent for profit, and it can also show ways in which you are modifying your business to cope with losses.

From the link you posted. This pretty much answers your question.

And the IRS would love to classify just about every ranch as a hobby, instead of a business.

[d_e_smith]

I'm out. My area is corporate tax and finance anyway. I'll let the individual pros handle it....

Hopefully the IRS agree with you when they come knocking after years of showing a loss.

So how much can you gift the landowner?

[JBJTX81]

And the IRS would love to classify just about every ranch as a hobby, instead of a business.

Not just a ranch. Many many businesses in general. I see P&L's and balance sheets for about 65 different businesses monthly. I don't work in acct/finance. I'm an ops guy. But I see the financials. Most business aren't structured to make gobbs of money on paper and there is a reason for that.

[junkmanhunter]

And the IRS would love to classify just about every ranch as a hobby, instead of a business.

If it is a true working ranch, it is a business. What the OP is wanting to do is to set up a completely fictitious company to help pay his hunting cost.

His intent and purpose is solely to deceive the tax system. Good luck and I hope he figures it out. .
Personally, I hope he figures it out. It doesn't make me a bit of difference either way.

[Bily Lovec]

I cant imagine the little bit of $$ you could make would be worth the hassle...

[Atfulldraw]

this is exactly why the tax code sucks.

The answer is.....hire a tax attorney and a CPA and roll the dice, if you are up for that kind of fun.

and the fear of the IRS is also why people with money can do whatever they want.....when rich people screw up something like this, it isn't on the bowhunting forum with their intent clearly spelled out, and they have someone standing there ready to take on the government if they come after you.

For the record, my personal opinion (I'm not a tax attorney or a CPA) would be that if you are running it as a business and can show the income, you can take the deductions.

We have a similar situation in that we have dogs, they are our pets, but it is also somewhat of a business (actually a couple of different ones). It's definitely not our main vocation, and it surely doesn't make us a lot of money, but it is a business. One of our businesses is a little different in that it is structured as a non-profit, so none of this may apply to your situation.

We are careful and lean to the safe side where we draw the line between business and recreation uses of the dogs, equipment, and expenses. I will openly admit that I use the same dog to make money and to trail my own deer.

Should I be deducting half of the cost of that bag of dog food? 2/3? 1/3?

[d_e_smith]

Use Mileage on the dog.

[Atfulldraw]

Use Mileage on the dog.

that requires a logbook, and I hate paperwork!

[Kdog]

Good luck when you get audited.

[Bear82]

I think you would have to be spending $10-20k for feed and expenses yourself for it to even make it worth tempting. Just $2-3k in feed does not seem like it would be worth taking a chance on deducting. If you are planning on not claiming some of the hunters lease money just so you have more expense, would not be a good idea. IRS probably frowns more on hiding revenue versus taking deductions.

[2B4Him]

As a lease manager I have no intention of earning a living or even making money as an outfitter. However, could I put together a business plan, start a sole proprietorship call Justin's Outfitting Service, run it as at loss and write off all my hunting expenses at the end of the year? How long could I run it at a loss according to the IRS before they say its not a legit business. I'm just thinking my truck, trailer, 4 wheeler, mobile home at the lease, gas corn, feeders, stands, the cost of the lease, utilities etc are all legit business related expenses. So how do I structure things to be a legit, crappy, business man that can get some tax breaks to help offset what I pay on my other income?

I hope you share a hard drive with Lois Lerner so this info. won't be available when the IRS audits you.
You would eventually have to show that you were TRYING to make a profit.

[RMAD]

I have a friend who's dad does it. He says he has a guide service. Not sure how he does it. Not sure the tax code on whether it is loss or break even, or break even or show profit to be considered a legit business by the IRS. Hopefully break even is good enough and you could do that every few years. Or blame losses on the falling oil prices. Possible would have to pay for the whole lease then everyone would pay you back which would be the income. Then write off cameras,feed,gun,atv,feeder, depreciate, camper, any plumbing or elec. work,mileage one way I think,$45 a day per diem over 70 miles I think,trailer depreciation, and anything else associated with going to the lease. But in the end it would be a gamble on an audit but keep good records and you should slide. It is about the same as what most farmers and ranchers do. Farmers rely more on insurance or government programs to cover their loss than anything. Alot of small ranchers use livestock for the tax write off. Guess if you do have an actual paying job then you should be entitled like the ones who don't work and think they are entitled to be given a free hand out.