farm loss


B

Brew1

I didn't think the 'three out of five years' rule applied to
farming but was unable to find anything in IRS publications
as to required profitability. Is there a cut-and-dried
standard at all? Is it essentially a gray area, where the
farmer might be required to show they are not engaged in a
hobby?

Thanks for any help provided.
 
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S

shagnasty

Brew1 said:
I didn't think the 'three out of five years' rule applied to
farming but was unable to find anything in IRS publications
as to required profitability. Is there a cut-and-dried
standard at all? Is it essentially a gray area, where the
farmer might be required to show they are not engaged in a
hobby?
The three out of five "rule' is only a rebuttable
presumption. I've had Farms and other businesses that have
shown losses for more than three years in a row that were
always accepted. One guy claimed so much cost of sales every
year that he had not only a net loss but a GROSS loss. His
wife worked and they got her entire withholding back every
year, no questions asked.

That is not to say no one is ever questioned. Usually they
aren't, but it is always possible.
 

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