Sales Tax on horse sale for hobby owner?

[paw]

@F_Alter;8192817

2. Income tax. It seems that at a federal level you are required to report the sale as income, but can also itemize related expenses under Hobby expenses. Therefore, I report the $25k as income, but I can deduct the board/training expenses, vet expenses, original purchase price, and feed expenses for which I have receipts which should effectively negate almost all the income.

Be very careful with using the Hobby Loss rules - the IRS can be really picky if they pick you for an audit. From what you’ve stated, it sounds like it might be possible that you’re within the lines, but you probably ought to check with an accountant who’s had some experience in thes matters to make sure.

[Taxi]

@F_Alter

So I’m selling a horse that is 6 now that I bought as a weanling. I paid $5k for him and in the last year alone I have invested $15000 in board and professional full training in him, let alone the cost of feeding and caring for him prior to that. I’m selling him for around $25K. Best tax consultant near me http://yourbooksontime.com/tax-consultant company. I’ve researched the laws in my state and it says all horse sales are taxable unless the horse is being sold for breeding purposes (horse is a gelding, so this is n/a). They don’t seem to have a provision for people who are not running a business (those individuals also have the ability to write off their expenses related to the horses they sell). So, given I sell him for $25K, am I required to pay sales tax on the entire purchase price, even though my actual profit after taking account what I’ve put into the horse is well…effectively more like a loss? If I read the law correctly, it sounds like the only amount I can deduct off the $25K is the original $5k purchase price.

This doesn’t seem right, but seems to be the case if I’m understanding the tax law correctly.

how did you solve the issue?

[Palm_Beach]

@Taxi

how did you solve the issue?

Sales tax is calculated on the price of what is being sold. So sales tax would be paid on the purchase price of the horse.

Income tax is calculated on income less expenses (very simplified explanation). The OP was mixing sales tax and income tax.

[clanter]

take note this is an OLD THREAD

[findeight]

OP has not been back for 4 1/2 years so guess we’ll never know how this went.

[Palm_Beach]

@findeight

OP has not been back for 4 1/2 years so guess we’ll never know how this went.

Hopefully not incarcerated for tax evasion!