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I bought a horse 2.5 years ago and am getting ready to sell her. She is the first horse I bought on my own, and it is my hobby (not a business). I only own her, and do not plan on buying/ selling more than once every 2 or 3 years. I expect she will sell for more than I paid. Question is, does Virginia (or the federal gov't) require me to pay taxes on the sales/ purchase price difference? I know some states do not at all, others do, and some don't if it is an infrequent occurance. Thanks!

Submitted: 164 days and 7 hours ago.

Category: Tax

Value: $18

Status: CLOSED

State/Country relating to Question: Virginia

Posted by Merlo 164 days and 7 hours ago.

Answer

Hello cold97,

Yes, you are required to report any profit you make from the sale of his horse. This is true both at the federal level and in the state of VA.

Since this is not a business for you but is rather a hobby, you would report any profit that you made on line 21 of Form 1040 as "other income". That will then become part of your federal adjusted gross income, and that same income transfers over to your VA state return.

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Thank you cold97 and let me know if you have more questions.

164 days and 6 hours ago.

Reply

Hi Merlo,

I had reached out to the VA Department of Taxation the same time I reached out to you, and they are telling me that because of the intent and frequency of my horse selling (not for the purpose of making a profit, rather it is a hobby, and it is less than the allowed 3 times per year), that it would qualify as an "occasional" sale and not be liable for tax. Does that sound correct, or are they missing something?

Thanks,
Lauren

Posted by Merlo 164 days and 6 hours ago.

Answer

Hello again cold97,

When they refer to "occasional" sale of less than 3 times per year, they are referring to sales tax needing to be charged.

When you make occasional sales less than 3 times a year, you are not required to charges sales tax on those transactions, and I have no doubt that is what the rep thought you were referring to. The gain you have from the sale is subject to income tax, regardless of how often you make these sales.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you XXXXXXXXXX

164 days and 6 hours ago.

Reply

Ok, then one more follow-up question and I think I'll be clear!

I have invested more in my horse than the difference between my purchase and sales price, so with expenses I am slightly negative overall. Can I count those costs against the gain?

Accepted Answer

Hello XXXXXXXXXX,

Yes, you may include any costs that you had associated with maintaining this horse since you purchased it. It is ends up you actually have a loss, then you cannot deduct hobby losses from your other income. But at the same time you would then not need to include this in your taxable income. If you end up with a loss, you simply report nothing on your return.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you XXXXXXXXXX and let me know if you have more questions.

Expert:	Merlo
Pos. Feedback:	99.9 %
Accepts:	7663
Answered:	10/7/2009

Accountant

25+ years tax consulting. Specializing in returns for US citizens living abroad

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Ok, then one more follow-up question and I think I'll be clear!

I have invested more in my horse than the difference between my purchase and sales price, so with expenses I am slightly negative overall. Can I count those costs against the gain?

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Ok, then one more follow-up question and I think I'll be clear! I have invested more in my horse than the difference between my purchase and sales price, so with expenses I am slightly negative overall. Can I count those costs against the gain?

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Related Tax Questions

Ok, then one more follow-up question and I think I'll be clear!

I have invested more in my horse than the difference between my purchase and sales price, so with expenses I am slightly negative overall. Can I count those costs against the gain?