CCH provided the following, related to a case in which records were a highly important item. I present it below (with compliments from CCH) merely to show the increasing need for records and their importance in turning things one way or the other. I realize that the bulk of you are not potential hobby farmers.............but note the points that the Court used in making its decision. Those elements directly affect any business trying to get a deduction. Note the picture that the Court was able to draw with respect to the business, its intents---and therefore the probable nature/character of deductions--------..............the point is that there had to be something the Court could look at in order to draw that picture, and "that something" was the peripherael records/documents that are not directly related to a transaction. A check, or paid invoice, or a contract, are obvious items.........everyone understands those. But what about agreements to do things, like the tiling issue that came up a while back? Letters, written memos, etc etc can go a long way...............and the problem is, one does not know that those are needed until much later, so getting into the habit of keeping such things is not a bad idea. For you who are deducting items related to family employees-----------are you doing things to formalize the arrangement? Time sheets, memos as to duties performed, etc etc. Takes just a few minutes, and can go a long way to "moving on to another topic" during an IRS exam. Example-----------how many of you mark your fuel tickets as to which vehicle when you fill at the local pump? I had that issue not too long ago, and had to bend over and cough due to other issues in the return that were much more expensive that the agent was willing to give on. "If the tickets are not marked, how do I know he did not fill his wife's car instead of the business pickup?"................little hard to refute when both were gas engines.............so...........a "negotiation" occured...........but we could have had everything if the tickets had been marked, 'cause the "other" items were much more solid.........even though a little on the grey side. Like it or not, the bean counters rule at the IRS. From CCH........................................................ Federal Tax Day - Current,J.3Taxpayers Engaged in Horse Breeding Activity with Profit Objective; Losses Deductible (Dennis, TCM), (Oct. 6, 2010) A married couple engaged in a horse breeding activity with the intent of making a profit and were entitled to deduct their losses from the activity for several tax years. Overall, the couple carried on the activity in a businesslike manner by having a business plan and executing it, by maintaining financial records and books for the activity and using accounting software to track expenses, by having separate personal and business accounts, by using different methods of advertising, and by changing operating methods and abandoning unprofitable ones. In addition, the husband sought advice from knowledgeable individuals and developed veterinary and training skills; the couple did not derive pleasure from the activity yet spent vast amounts of time on it; and the couple did not have other substantial sources of income. Although the husband expected that the land used for the activity would appreciate, this one factor did not negate a finding of a profit objective. Finally, although the couple had a history of losses from the activity, the losses were incurred during the start-up phase of the operation and were impacted by an unforeseen drought that increased the cost of feeding the horses. J.L. Dennis, TC Memo. 2010-216, Dec. 58,350(M) Other References: | 
Tax stuff----- the value of records
