Horse Boarding Business

[CliffOHara]

From everything I read, it appears a Horse Boarding business should be reported on a Schedule C, okay.  How do I report the property that the Horse Boarding business in on, is the portion of the property that is used as the Farm land get reported on Schedule E? 

[sjrcpa]

Client has a farm and a horse boarding business?

[CliffOHara]

Correct, they purchased a Farm and built stables in an effort to Board Horses as a business.

[sjrcpa]

Is horse boarding ancillary to the farm?

Or is it the main source of revenue?

Or is it the only source of revenue?

[CliffOHara]

No, they purchased the Farm, for the sole purpose of installing stables and Boarding Horses.  No other farming activities are planned on being conducted there.  I think I hear what you are saying, if they can also do something "farming" activity, then it cleanly goes on Schedule F?  

[sjrcpa]

So it is a horse boarding business reportable on Schedule C.

Now I don't understand your original question:

" is the portion of the property that is used as the Farm land get reported on Schedule E? "

And the first time I read it I thought it said Schedule F.

[TaxGuyBill]

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@CliffOHara wrote:

No, they purchased the Farm, for the sole purpose of installing stables and Boarding Horses.  No other farming activities are planned on being conducted there.  I think I hear what you are saying, if they can also do something "farming" activity, then it cleanly goes on Schedule F?  

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I you are confusing things by calling it a "farm".  If there is no income from "farming", they bought land. 

If the only income is from horse boarding, just put it on Schedule C.  There is no farm.

[sjrcpa]

Yes the term farm was confusing me, too.

[BobKamman]

"From everything I read"

What have you read?  My inclination would be to put it on Schedule F.  Who makes sure the horses are fed?  Who calls the vet if a horse gets sick while the owners are in Lexington for the weekend?  Who cleans the stables?  What depreciation method do you want to use on buildings that look like what you find on a farm and are used the same way? 

[CliffOHara]

One follow-up, then the real estate goes on Schedule E, prorated for Business usage?  

[CliffOHara]

I assume, you cannot put real estate on a Schedule C, so it goes on Schedule E, correct?

[BobKamman]

People who breed dogs in their back yard and storage shed are told to file Schedule F.  It all depends on what the meaning of "farm" is.  I would call horse boarding a category of "animal husbandry," for which I would use the dictionary definition of " a branch of agriculture concerned with the production and care of domestic animals."

[sjrcpa]

NO. Schedule E is for Rental Real Estate and Royalty income.

Also go back to where you were finding horse boarding is a Schedule C business instead of Schedule F. I'm not convinced. I'm not going to research it for you.

I'm leaning toward Bob's opinion.

If it is Schedule C, of course Schedule C businesses can have real estate assets.

[sjrcpa]

While doggy day care is Schedule C.

[BobKamman]

Sometimes we have to scrape the bottom of the barrel to figure out which form to use.  I don't think there is any statute, regulation, revenue ruling or rev proc that addresses the issue of when to use C or F.  All I can find is something in the Schedule F instructions that, as you point out, mentions pet boarding goes on Schedule C.  Are horses pets?  Does IRS even acknowledge the existence of horses?  There is no Principal Agricultural Activity Code for them.  You have to throw them in with alpacas and minks.  

[CliffOHara]

Thank you for the assistance.   

[15740 · Accepted solution]

I prepare several "horse businesses" tax returns.  Number 1 Item to be aware of - EVERY ONE of my returns that mention "horses" has been audited~ ~ that is just a given!  So alert your clients that their bookkeeping needs to be accurate!

All of my horse clients have farming involved with their equine businesses.  The very first auditor, and every auditor since then, has told me that i can either do a Sch. C for the horses and Sch F for the rest of the farming income....or put all of it on Schedule F.  I make notes and separate income and expenses (noted on the return) that show horse or farming.  They all told me that it would be so much simpler to put it on an F, otherwise it is difficult to deduct feed, vet, etc on the Sch C.  

If it's horses and then land rent, I would do Schedule F for horses and then the Sch E for rent.  I would figure out the acreage and income for both and then divide expenses accordingly on the two forms.

Good luck!  And, like I said, be prepared for an audit!

[CliffOHara]

Thank you. I've read several other items indicating to put the "boarding activities" (dropping the mention of horse), 🙂 on Schedule C.  Schedule F makes so much more sense for this type of Business.  If it was to go on Schedule C, then my issue becomes the real estate. If it is exclusively used for Boarding, then is the real estate Sch E? I personally have never deducted any real estate taxes on Schedule C before, so I thought it was very funky. 

[qbteachmt]

"Are horses pets? Does IRS even acknowledge the existence of horses? There is no Principal Agricultural Activity Code for them."

https://www.naics.com/naics-code-description/?code=115210

"This industry comprises establishments primarily engaged in performing support activities related to raising livestock (e.g., cattle, goats, hogs, horses, poultry, sheep). These establishments may perform one or more of the following: (1) breeding services for animals, including companion animals (e.g., cats, dogs, pet birds); (2) pedigree record services; (3) boarding horses; (4) dairy herd improvement activities; (5) livestock spraying; and (6) sheep dipping and shearing."

https://www.naics.com/naics-code-description/?code=112920

"This industry comprises establishments primarily engaged in raising horses, mules, donkeys, and other equines.

Cross-References.

• Establishments primarily engaged in equine boarding are classified in Industry 115210, Support Activities for Animal Production; and
• Equine owners entering horses in racing or other spectator sporting events are classified in U.S. Industry 711219, Other Spectator Sports."

"They all told me that it would be so much simpler to put it on an F, otherwise it is difficult to deduct feed, vet, etc on the Sch C."

We also have to separately report personal property taxes from business use property taxes for ag purposes for the State.

"in an effort to Board Horses as a business."

It helps that they don't have personal stock in those stables, then.

The biggest issue seems to be separating and allocating for their own livestock vs clients' and all of their little side deals. Most times, the person deciding to create and run a boarding facility is already personally committed because of owning and raising their own horses, intending to do riding school or eventing. For instance, they lease the right to use boarded horses in riding classes by giving the horse owner discounts on the boarding costs and the students get a break in class fee if they come in early or stay after to do chores in the barn and paddocks.

[sjrcpa]

"Most times, the person deciding to create and run a boarding facility is already personally committed because of owning and raising their own horses"

Exactly.

Is this a client who has money to burn looking to try to create a business out of their own horses.

Around here at least, there is no way you can make money by buying a farm and boarding horses as the sole revenue stream. Land is too expensive here.