Agriculture Reference
In-Depth Information
formal income and expense records. You will need to keep your horse operation transac-
tions separate from monies used for domestic matters, other farm ventures, hobbies, and
your other work. One of the best ways to do this is to maintain a separate checking ac-
count for your horse venture. All equine expenditures and income and no others should
be handled through this account. You can, of course, make cash withdrawals (hopefully
profits) from the business account to use elsewhere.
Your horse business will need to show profit intent in order to retain your business or
farm status. If that status is in question, the Internal Revenue Service (IRS) will use specific
guidelines to determine if your horse operation is designed with profit intent. It will look at
the manner in which you carry on your activity and the type of bank accounts, records, and
logs that you maintain. The IRS accepts the following types of documentation in an audit:
receipts, checks, logs, third-person verification, and verbal description.
It doesn't matter whether you make notes on a 3x5 card, in a notebook, or on your
computer—just choose a method that you will use regularly.
It will note if you have sought advice from experts, not only horse-related advisers but
also marketing and financial counselors. The IRS will evaluate the time and effort you
expend in your business: is it a weekend diversion, a full-time business, or something in
