Posted 9/15/2021 09:00 (#9221308 - in reply to #9220106) Subject: RE: Can I write off a steak dinner?
He wanted me to add $500 income to my tax return.
I would have told him that the seed, fertilizer, pesticides, and fuel for that garden were not deducted, therefore there is no need to include it as income, my wife paid for those. What it boils down to is if the expense is deducted as a business expense then you need income to offset the deduction because you sold it to yourself.
If you dig into it further, in Minnesota if you purchase feed for an animal for personal consumption you owe Sales & Use tax. In our situation, we feed out 50 steers/year and separating the feed out for 1-2 hd/yr for personal consumption is difficult since you have to remember to pay Sales & Use tax on 1-2 bags of milk replacer, 3-5 bags of starter, and 6-8tons of grain, plus prorate expenses incurred for baling hay, hauling manure, vet work, drugs, etc and then file a Sales & Use Tax return to pay in the tax that was not collected by the seller since we have a tax exemption for Ag Production. In the end it is far less work to just deduct all the livestock expenses as farm expenses and write a check to the farm for the steer when it is butchered using the 10% employee and 10% family discount that we apply to all the sold steers. Sure we might pay a little income tax on the profit, but the $100 profit amount is not enough to cover the time for all the extra paperwork, let alone the $10-20 income tax due on the profit.
I know of some guys that miraculously have a couple steers "die" every year right around the time their butcher has an opening for processing and never claim the steer as farm income because it was a "death loss." If they were to get audited and the auditor found their personal checks to the processor for processing and no personal expense for the critter they might get caught; some guys go so far as deducting the processing too. In the end, it is no different than not claiming the income because you were paid in cash and it was not traceable.