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Thread: Business or Hobby

  1. #11
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    Like my father in law said "I wish I could write off my golfing expenses."
    Brian Eldredge
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  2. #12
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    Quote Originally Posted by jmayerl View Post
    What about the guys that spend $50,000 on a new bass boat to fish a few weekends a month and maybe win $100 a year in a local bass club tournament? My point is that there is a huge difference between a hobby and a business, seems like many people in maple blur the lines.
    Agriculture is treated differently than bass fishing by the IRS. According to the tax professionals I have spoken to in the last few days you have 3-5 years to show a profit - after that you may have found your new hobby. You can still write off expenses when it is considered a hobby up to the amount of revenue. Basically, you can clear out any profit with deductions. If it is operated as a business you can carry over losses and potentially take the business loss against your non-farm income. Everyone has a different tax situation - I would suggest talking to a professional if you have any questions. It really helped me!
    Trade River Sugar Bush
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  3. #13
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    Quote Originally Posted by doocat View Post
    When you start spending more then you make it's a business!!!!! Just a thought.
    Actually the IRS would say that is a hobby.
    Trade River Sugar Bush
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  4. #14
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    Neither.it's an addiction!!!!!!!!!!!!!!!

  5. #15
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    Quote Originally Posted by sugarman3 View Post
    Neither.it's an addiction!!!!!!!!!!!!!!!
    Seems to be And we could all be addicted to worse things The hard part I have as a hobby guy is when somebody says "I'd like to buy some from you" I usually just give them a bottle, and can't bring myself to sell it even though I feel it is very tasty, and pretty decent quality.....guess that is what makes me a hobbyist

  6. #16
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    For those that have gone the business tax way, did you form an LLC business? My sugar bush is on my property I live at and will looking to set up a maple business with tax ID and such. Not sure how homeowners insurance will coincide with a business on property and if an LLC will balance that out. A lot to consider.
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  7. #17
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    From the IRS website:

    "Business or Hobby? Answer Has Implications for Deductions
    FS-2007-18, April 2007
    The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit.
    In order to educate taxpayers regarding their filing obligations, this fact sheet, the eleventh in a series, explains the rules for determining if an activity qualifies as a business and what limitations apply if the activity is not a business. Incorrect deduction of hobby expenses account for a portion of the overstated adjustments, deductions, exemptions and credits that add up to $30 billion per year in unpaid taxes, according to IRS estimates.
    In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.
    In order to make this determination, taxpayers should consider the following factors:
    Does the time and effort put into the activity indicate an intention to make a profit?
    Does the taxpayer depend on income from the activity?
    If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
    Has the taxpayer changed methods of operation to improve profitability?
    Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
    Has the taxpayer made a profit in similar activities in the past?
    Does the activity make a profit in some years?
    Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
    The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.
    If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
    Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). These deductions must be taken in the following order and only to the extent stated in each of three categories:
    Deductions that a taxpayer may take for personal as well as business activities, such as home mortgage interest and taxes, may be taken in full.
    Deductions that don’t result in an adjustment to basis, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
    Business deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.
    Link:
    Further information is available in IRS Publication 535, Business Expenses"
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  8. #18
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    I find the IRS guidelines kind of ironic.......what if you have acreage and you are growing hundred of Christmas trees on your tree farm......you know you can't grow Christmas trees in 3 years They are going to tell you that it's a hobby because you have no revenue?
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  9. #19
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    The hobby or business question isn't always clear to those running them, but what's real clear is that the space between them is called misery.
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    Brian

  10. #20
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    Nov 2013
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    Perkinsville, VT
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    Quote Originally Posted by johnpma View Post
    Found this on the IRS website:

    "You are in the business of farming if you cultivate, operate, or manage a farm for profit, either as owner or tenant. A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. It also includes plantations, ranches, ranges, and orchards"
    What in the world is a truck farm?

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