Dear All, And especially those of you who do business with animals. I would like to chat with someone knowledgeable (Ken?) about running an actual business (with tax deductions and everything) that have animals as their main ingredient. How do you go about it? How do you register your Ranch title? So on and so forth. Or is it better to do this without involving any regulatory hindrances. Thank you so much in advance.

-- Lawannea Sue Stum (Whitedov1@citlink.net), September 06, 2000

Answers

First you need to get a good tax accountant who works with farms . He will know the laws , not only federal but local .Keep all receipts , even grocery store ,gas,eating out , you name it .

There are many, many things you can write off you would not even think of .We all think of the cost of animals , vet care , feed , and housing . But to make a go of it we have to think father .You may even want to contact your local extension office .

-- Patty Gamble (fodfarms@slic.com), September 06, 2000.

The first thing you need to do is to contact the IRS and get a copy of the publication which covers Form F (Farming), plus an actual copy of the form itself. It is divided into various categors. Once you understand what expenses are deductible, get one or two of those file folders which expand into about 12 slots. For any expense even remotely related to a particular category, place a receipt for it in the appropriate slot, so when you do your taxes (or have them done) they are already accumulated under the appropriate category.

As noted, when you declare your enterprise as a farming activity, there are a number of expenses you can write off against it. I have an account at the local farmers' co-op. Everything I do there goes against that account and at the end of each month they give me a statement. At the end of the year they give me an annual statement (which you have to ask them for) with expenses broken out near the Form F categories. I give myself the benefit of the doubt, including subscriptions to farming-related publications.

To be fair, when I am on the road and buy gas, I don't include it, even through it goes either in my pickup or flatbed. I like to think it balances out.

Some biggies are you can write off most of your mortgage payments, most of your property taxes and depreciate your equipment and buildings used to support the enterprise. Heck, I could even depreciate my bulls and cows, but don't want to have to keep up with the paperwork involved. Trying to separate out a 'home' office probably isn't worth it.

I use the cash-in/cash-out method. I do my own taxes and haven't been questioned on them. Believe me, doing the form for capital gains is probably ten times harder than Form F.

You may have heard you need to show a profit one out of seven years or the IRS will declare it a hobby. Not true. You only need to be making an honest effort to make it profitable.

I am not a tax accountant so take the above for what it is worth.

-- Ken S. in WC TN (scharabo@aol.com), September 06, 2000.

You have gotten some good advice here. We are registering our ranch name because we use it for a number of things including my businesses. Between the tax books from the IRS and the advise of an account you should be in good shape. We use Quicken to keep track of stuff. It is 'ok', but I haven't found anything else that cheap to use.

-- beckie (sunshine_horses@yahoo.com), September 06, 2000.

We do our own taxes, using Turbo Tax, business edition. Costs about $59, and it walks you through everything completely. Also use Quick Books Pro for the day to day bookkeeping. You can obtain a business license with your state and register your "trade name" i.e. your ranch name there also. Ken is correct, you only have to "attempt to make a profit", so if you advertise animals for sale, keep copies of the advertisements, any sales you make, etc. It does take a while to make a profit, as for a while, you are putting a lot into building your place up, and equipment is expensive. Good luck, and KEEP THOSE RECEIPTS! Jan

-- Jan in Colorado (Janice12@aol.com), September 08, 2000.