Reptile & Amphibian Forums

In 2007 a few of my snakes passed on. I am wondering as I do my taxes for my snake business if I can take a loss for the death of these animals. If I can which forms would I fill out to declare the loss.

Thanks in advance for your help.

Brian
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Brian Gundy

www.for-goodness-snakes.com

One of the best "business" questions I have heard in a while on here. I would be interested in hearing from people who would have used this in the past or perhaps are cpa's that would know.
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I don't know, but I would imagine its similar to agriculture/livestock/commodities.
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"As hard as I've tried, just can't NOT do this"
John Crickmer

There's a Blood Python breeder that posts on that forum that is an accountant. I'm sure he'd know. May just want to re-post over there.
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Gilbert Boas
The Boa List!

Chris:

Thanks for your advice.

I've just posted the same question on that forum.

I hope you're all having a great season.

Brian
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Brian Gundy

www.for-goodness-snakes.com

>>In 2007 a few of my snakes passed on. I am wondering as I do my taxes for my snake business if I can take a loss for the death of these animals. If I can which forms would I fill out to declare the loss.
>>
>>Thanks in advance for your help.
>>
>>Brian
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>>Brian Gundy
>>
>>www.for-goodness-snakes.com

Have you tried to ask the "big" breeders like Pete?
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Strictly Serpents
Monty Montalbo/Niels Berg
619-602-4908

Monty:

I'm going to call Dan and Colette Southerland tomorrow to see if they have any advice. I was hoping other breeders on this forum had experience with this subject and would be willing to discuss it.

Thanks

Brian
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Brian Gundy

www.for-goodness-snakes.com

Hi Brian -

If you are carrying your breeders as inventory on your books (the same way a manufacturing company carries its equipment), then you should be depreciating them against an acceptable depreciation schedule (it has been many moons ago for me, but as I can best recall, I think I used a 5-year schedule ... and this was accepted by the IRS ... I know, because I was audited my 1st year as a business). Your ANSWER: write off the full depreciation value reamining on your books for those animals that have died during that tax year ... by so doing, you realize an accelerated depreciation expense, and hence, decrease your taxable profit. Gosh, I thought I had retired and did not have to think about these kind of things anymore ... wrong!

I will mail you the invoice for my consulting fee ... this will give you another tax write-off! Let's face it ... we really need to move forward with a flat tax, sales tax, or anything other than what we have today.

Till Next Time ... Bill

Bill:

Thanks so much for the information.

I hope your season is going great.

How much would you like that check written out for?

Take care my friend.

Brian
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Brian Gundy

www.for-goodness-snakes.com

As a CPA I can confirm the answer Bill gave is correct. In case his example wasn't clear let me expand on it a bit.

You pay $500 for a snake in year one. You are going to depreciate that cost over the useful live of the snake the same way a business would a piece of equipment and you go with 5 years (for example purposes). In year one you would have on your balance sheet a snake with a "net" book value of $400. $500 of cost as a debit and $100 of accumulated depreciation as a credit. The offsetting debit to the accumulated deprecation would be depreciation expense.

The entries your accountant would book would look something like this:

Snake $500
Cash ($500)
To record the purchase

Accumulated Depreciation $100
Depreciation Expense ($100)

So if the snake dies the next year you would only recognize $400 of expense because you took $100 in the first year.

Keep in mind if you don’t have any revenue to offset the expenses they do you no good.

Keep your receipts or some other documentation to substantiate your cost. Oh – guess what might happen when you start telling the IRS about all the money you paid Breeder Bob for your snakes…who do you think they might start looking at next.

If I spell this out, maybe I'll find the error in my logic.
If I buy a snake for $2,000. Fully depreciate it in 5 years. It is worth $0 on my books. Then, I sell it for $2,000 after its fully depreciated in 5 years. I have realized a $2,000 Net Capital Gain on the sale of a snake worth $0. Would that be a long term capital gain or a short term capital gain?
Is that some kind of Contra-asset accounting? Where have I gone wrong?
jsc
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"As hard as I've tried, just can't NOT do this"
John Crickmer

John -

While I do not remember the acceptable accounting practices, your logic is exactly right ...

Many years ago I dissolved my reptile business as a legal corporation. At that time I had completely depreciated my breeder inventory ... and guess what? Not only did I have to buy my animals back from my own corporation at fair market value, but it was shown as income on the books. I cannot recall if it was booked as a capital gain, but nonetheless, somewhere in the mix is was reflected as income.

You might say "they get you coming and going".

Bill