Hobby Farm

[Christian]

A client finally succumbed to my warnings about encouraging an audit and will drop his Schedule C hobby farm from the return. He still has a few items on which the depreciation has not run out. Can these be deducted on the Schedule C or is the remaining depreciation simply lost ? 

[Sara EA]

He receives the items, so his basis in them is the amount of the remaining depreciation.  Why was a farm reporting on Sch C instead of F?

[BrewOne]

Fixed assets: under disposition, put converted to personal use and that will stop the depreciation.  You can leave them in fixed assets, handy if they're ever sold.

[Christian]

It was reported on Schedule F. It's been a loooong season.

[jasdlm]

When I first started practicing, a client (new to me then) got audited and his long-horn steer ranching business was determined to be a hobby (which it was, but ...).  They're serious about that!  (Or they used to be).

[BrewOne]

When a colleague retired, one of the clients I inherited raised miniature horses.  After doing one return and not thinking much about a small loss, he returned with a bigger loss.  That's when I started digging--the first year I did was the best (closest to breaking even) year he'd ever had!

I remember a stat--70% of farms show an annual loss--but even horses are supposed to be profitable some time.  And keep in mind the "2 out of 5 years" (horses, 2 out of 7) profitability is not absolute--I've seen the IRS disallow from the get go, although I believe there is an election to have the IRS postpone the determination on new ventures.