CONSIDERATION OF LAND AS AN ASSET OF A HORSE BUSINESS IN A "hOBBY lOSS" cASE

One of the ongoing problems in the evaluation of so-called "hobby loss" horse business before the IRS is whether or not the appreciated value of ranch or farmland counts as an asset of the horse business.

The Treasury Regulations provide that appreciated assets of a horse business including ranch or farm land are to be taken into account in evaluating the profitability of the horse business for purposes of determining whether or not the horse business is motivated primarily for profit; that is, whether or not a horse business owner can deduct his or her losses against other income. However, Tax Court cases which have applied this rule have done so inconsistently over the years. 

Paul Husband's latest article focuses on land as an asset in a "hobby loss" case, and outlines examples of how courts have interpreted the code. 

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