[Mobea]

I have a client that has bought several hundred acres and will is starting to stock it for big deer type hunting. In the meantime, he is buying and raising prime does and bucks and intalling stands and so forth. And he has built a small ranch house on part of this property. He has made a major investment in this property and improvements.This ranch will mostly be used by hunters who will pay several thousands of dollars to hunt on it. So far there is no income just improvements to the property. My question is, in the meantime, do I file it as a farm since he is buying and breeding, and since it may take a while to establish, farming losses for a few years may not raise a red flag as easily. Or as sch c with no income ,big capitlization cost and losses,but there will only be customers there occasionally, or a schdule E because he is leasing out the right to hunt on his property. Or do I file it as farm rental income? This one kind of has me stumped. What would you suggest and so why?I was thinking that I would file it as a farm and then when it started producing real income switch it over to Sch C. I've researched this on the IRS website and can't get a firm grip on it. Has anyone else had a client like this?

[AtlantaTaxExpert]

In my opinion, this is a business on which you file Schedule C from DAY ONE.

That is the cleanest and most consistent way to report this venture.

[Mobea]

ATE What if he doesn't start earning any income for three years or so, the time it will take to stock his ranch with enough large animals to make it worth someone to start paying him to hunt there. Wouldn't the IRS question this? In the meantime he will be buying and selling and breeding the deer to build up the "big hunt stock" so to speak. So any income that he would show would be from selling the livestock which catorgorizes it as a farm. At least with a farm the IRS realizes that it may take a few years to start turning a profit and large losses are not uncommon. I'm just afraid that if I put him on a C and not show any income, then the IRS may think of this as a hobby and disallow his deductions. This was a tough one for me, so I'm glad to get your input on this. I mean basically what this ranch will be in like one of the fishing spots that are so overstocked that you can reach in and almost catch a fish with your hand. (Except it would be big bucks and does) But he has to get it to that point before he can start charging $6000 per head to hunt on his property. Is it 3 out of five years that a business must show an income before the IRS starts to look at it as a hobby? If that's the case, then maybe I could put it on a C right off the bat. I just don't want it to get flagged. Does that make sense?