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Dear TaxMama,

I have a friend raising horses - she has a boarding/training stable. 

She has her first new baby horses - born in 2004.

How do I treat them.

What is the tax basis for these foals?

Are they depreciable?  or appreciable?

Help and Thanks,

Larry

 

 

 

Hi Larry

Congratulations!

No basis. They're babies. So they cost the owner nothig - at least no direct dollars.

When/if she sells them, use Schedule F since the horses are inventory.

Basis will still be zero. You'll be writing off all their maintenance costs.

Does this help?

Take a look at the Farmers Tax Guide - Pub 225 for more information

Oh,  yes, you ARE using Schedule F to report this business, not Schedule C, right?  Please, DO. It will make a huge difference in your audit rate.

Best Wishes,
Eva Rosenberg, MBA, EA