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United States Equestrian Federation

I would like to thank you for taking the time to talk to me yesterday regarding my deceased mare Picante.
Your credentials are very impressive
and I would certainly feel confident if you were handling Picante’s case.
D. Largeteau,
Axens North America

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Title: "IRS Section 469 - Its effects of the equine industry and those involved"
Author: Allyson Nelson

We are all horsemen because of the passion we have for the special horses in our lives.

Most of us consider our time spent with the horses a hobby and some of us consider it to be a business.

Those who look at their time with the horses as a business need to be aware
of IRS Section 469.

This internal revenue code discusses passive activity losses and credits. A passive activity is a “business in which the taxpayer does not materially participate on a regular, continuous, and substantial basis.”

If an equine enthusiast is lucky enough to persuade the IRS that their interest in horses is actually a “business” it is unlikely that they will be able to deduct any losses from the horse business from any other income they incur. Losses from any passive activity can only be deducted from other passive activities. One benefit is that the “passive losses” can be carried over to future years.

For the IRS to look at an equine business as active the owner must prove that they are a material participant in the business. Generally if one works 500 hours annually in the business the IRS will consider it active. If one works between 100 and 500 hours the IRS will look at many other aspects of the owner and business to determine if the business is passive or active. If one works under 100 hours in the business you will almost always be considered passive.

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