tax court confirms
Strict Record Keeping
and Expectation of Profit
Ensures Losses in Horse
Business May be Deducted
By Adam Trenk, Esq.
I
f you are reading this article then you may already know first hand how
hard it can be to make money in the horse business. Unpredictable overhead
costs compounded by a struggling economy make it challenging to turn
a profit at breeding and training horses these days. That is why it is more
important than ever to ensure that you can deduct your losses and minimize
your tax exposure. So long as you have the expectation of a profit and clearly
document your labors in an effort to demonstrate this expectation, you are
more likely to be able to deduct any losses you incur.
A 2012 tax court ruling confirmed that even substantial losses may be
deducted, even if there is another primary source of revenue, provided that
among other things there is a legitimate expectation of making a profit and
your records are well kept. Blackwell v. Commissioner of Internal Revenue, T.C.
Memo. 2011-188, 2011 WL 3444327 (U.S. Tax Ct.).
According to Section 183 of the Internal Revenue Code, losses may not be
deducted for tax purposes unless there is an expectation of m