Trailer

[MGC94]

$5,000 1099 for horse shows

they bought a trailer that costs $54,000 to sleep in and pull it with a truck. They paid $4,511.23 in interest during 2020.  

What should I do to deduct this expense? 

Depreciation? 

Thank you 

[sjrcpa]

Is horse shows a trade or business for the taxpayer?

a hobby?

The kid's hobby?

[taxiowa]

Depreciate the % used for business use of transporting horses.  The personal pleasure use is not deductible.  As to the interest.  The business use portion would be reported on Schedule C or F.  The personal use portion of interest may be includible on Sch A as 2nd home.  Usually the purchase of these is for "Hobby Business", so convince taxpayers that the best way to survive an audit is to be reasonable and only take a % to business.

[MGC94]

How do I depreciate the % used for business? What type of asset would it be on the depreciation asset entry worksheet? They do not transport the horses in the trailer. It is for them to stay in when they travel to another state instead of getting a hotel. Where would I put this on the Sch C? 

[dd4vols]

I have a client  that has been in the horse-show business for many years.  They bought a $225k motor home for the same purpose you are describing.  i used 25% as the business usage and survived an audit unscathed on that issue. I had asked my clients to create and maintain a website for  this business, which they did also.  but their volume of winnings/stud fees/etc were much more substantial.  I just set it up using a standard farm equipment useful life.  And the auditor was very pleased we didn't try to validate 100% use and therefore 100% deduction..

[MGC94]

I understand taking a small % but where should I put the information. Thank you for your thorough response

[dd4vols]

on the asset entry page.... look for 'Business %'  usually in top part of the form, along with cost, purchase date, etc.   it's a part of the form that we never pay any attention to, until we need it, as the program assumes 100% business unless we tell it otherwise.

[MGC94]

what type of asset on the depreciation sheet? 

[MGC94]

what type of asset on the depreciation sheet like which letter G? 

[dkh]

@dd4vols  indicated  -   I just set it up using a standard farm equipment useful life.  

I believe that is letter E1   but it doesn't hurt for you to look through the drop down menu make sure that is the correct option for your situation