Minor's Cattle

[Jill Graff]

Grandpa buys 5 cows for grandson (6 years old). Grandpa feeds and raises the cows along with his own cattle. The calves are sold in grandson's name. Are the proceeds subject to self-employment taxes for the grandson? Grandson did not material participate in the cattle process. This is not a FFA project.

Thanks in advance.

[Jiggers]

Grandpa buys 5 cows for grandson (6 years old). Grandpa feeds and raises the cows along with his own cattle. The calves are sold in grandson's name. Are the proceeds subject to self-employment taxes for the grandson? Grandson did not material participate in the cattle process. This is not a FFA project.

Thanks in advance.

Why do grandparents and parents do this?

They want to write off the expenses, yet don't want to report the income.

What did grandpa do with the cost of the 5 cows?

What do I do? I report the sales on the grandpa's return. The money is just a gift.

No different than someone with a W-2 saying I am going to give my grandchild 2 hours per week of what I make and wanting to not report the income and let his grandchild report the income on his return.

If the grandpa refuses to report the sales, I allocate the costs for feed, vet, fertilizer, etc. for the sales not reported and deduct that ratio from the total costs of each item.

Same with farmers that have a calf or two butchered per year. My questionnaire asks if they butchered any cattle for personal use and if so, what is the FMV of the cattle. I add that to their sales. You would be surprised at how many do answer that question.