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My wife sells Equestrian real estate as a real estate

Hi ....my wife sells...

Hi ....my wife sells Equestrian real estate as a real estate broker. She wants to write off her horse expenses (boarding, training, etc) against here business income in the S-Corp. Can she do this?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

She markets her real estate by producing an Equestrian Almanac magazine twice per year and attends several horse shows where she has a VIP lounge. She deducts these promotional expenses but thinks she can also deduct the cost of her horse that she shows in a jumper class.

Accountant's Assistant: Is there anything else the Accountant should be aware of?

No that's it

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3/13/2018
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Regarding your wife's horse expenses, does the horse aid in her contribution of the generation of income for the S-Corp? If not, no, she cannot deduct the expenses. On the other hand, if the horse plays a direct role in the generation of income for the business, the expenses can be deducted as a business expense. SEE BELOW:

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What Can I Deduct?

To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

It is important to separate business expenses from the following expenses:

REFERENCE SOURCE:

https://www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses

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  • The expenses used to figure the cost of goods sold,

  • Capital Expenses, and

  • Personal Expenses.

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Customer reply replied 4 months ago
ok, thanks. I believe the expense are not ordinary for a real estate broker but she feels they are necessary to be visible to the equestrian crowd who buys the ranches that she sells.

While she thinks that they are necessary, the IRS may not think so. However, as the horse is sort of used as an advertising tool, she might be able to get away with writing a percentage of the expenses off. Definitely not the entire expense. Let's look at the horse as if it were a vehicle. You're allowed to deduct the percentage of business use. I'm thin*****, *****e thing with the horse. What percentage of her business is the horse involved in? Whatever that percentage, that is the percentage of the expenses that she can deduct. If she decides to deduct the percentage for the horse expenses, it would be wise for her to enclose a statement indicating why she has deducted the amount, whatever amount that will be. Do you follow what I am saying here?

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Customer reply replied 4 months ago
That makes sense Angela ....she ran thru about $37k of these types of expenses with $166k of income ...I am not going to deduct boarding and horse training as business expense but maybe a small allocation as mascot expense ...

would say that the boarding and horse training would be questionable deductions. However, I think that an allocation of the mascot expense should be an allowable deduction. Just remember, when dealing with the IRS or any taxing agency, err on the side of caution, rather than not.

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