Horses

[JG EA]

TP inquiring about participating in contest for the benefit of students who go also and for the benefit of the horse to be better as a teaching horse.

It sounds like a business expense to me, but wouldn't that also mean that any prizes would be SE income?

[Lion]

Is she in business?

Is she already in the business of teaching riding?

[JG EA]

Thanks for your reply - Yes in the business as of 2008.

[Lion]

Facts & Circumstances

I know the IRS really scrutinizes businesses with horses, looking for those trying to convert their hobby into a business. If she's been profitable enough that she can afford such a contest, and if it's usual in her industry, and if it's primarily to improve her skills, and.... You're going to have to lay out the rules and pitfalls and let her make the call -- if, you are already comfortable with taking the deduction. If you're not comfortable at this point, then she has to provide you with more information to make you comfortable.

[JG EA]

Thanks. This business is profitable now if you don't count depreciation. My question was if it is ordinary and necessary to be in the events then is it SE income to win a qrize? But I think I see the answer now from your thoughts. You are saying that I have doubts about being a business or a hobby or I wouldn't be asking about the prize money. It makes sense that if you use your business asset to make money - it is income for the business.

I guess I was thinkiing could there be an exception for the prize money? Maybe like business incentive payments that go on line 21.

Thanks for your ideas. Since I don't have to deal with it yet, I'll just tell the client I have to do further research, but probably SE.

[equinecpa]

Prize money is self-employed income, part of doing business. Just like racehorse earnings...

[JG EA]

Thank you. Since you are an expert in this field I really appreciate it.