Discussion:Palm trees, hobby rules? or long term capital gain
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Discussion Forum Index --> Advanced Tax Questions --> Palm trees, hobby rules? or long term capital gain
Discussion Forum Index --> Tax Questions --> Palm trees, hobby rules? or long term capital gain
| 6 November 2009 | |
| I will just get right into it.
4 acres of land dedicated to agriculture through the county. 1,000 palm trees were planted this year and are not expected to be available for sale until 6 years later. There were lines put in for irrigation, a pond was dug for retention of water, fertilizer, trimming ect... This is an every year expense being incurred but no return on the investment until the 6th year. I believe if it was handled as an income generating business then it would fall in the category as a hobby. This is not a nursery nor is there any other plants for sale. The time spent on maintaining the plants is minimal. My thoughts are that this would be a long term capital gain. Divide all of the expenses incurred over the years by 1,000 to figure the cost per plant and list the sales price as the price that it sold for. Any thoughts? | |
| 6 November 2009 | |
| I think it depends on the palm. Like, is it a date palm? Then, you'll have dates. Coconut palms, you have coconuts (and OSHA claims).
So, it depends on what kind of palm it is. Your crop will be income if it puts out a crop. So, is he growing it as trees to be cut, or as a producer of a regular crop? Think about the guy who grows asparagus. It takes three years to produce your first crop of asparagus, but after then, it keeps producing forever. How would he handle that? You got me thinking. It takes 400 years to grow a bonzai tree. I have no idea what you'd do with that one, but I know they sell them. I think if the man is in business, he knows it. He acts like it. Keeps good records and practices good husbandry. Buys books, advertises. He doesn't play on his farm, or wear a big cowboy hat and ride around in jet planes, or 3 wheelers. | |
| 7 November 2009 | |
| I did a small accounting assignment at a grower of palms for landscaping. From what they said and what I saw, it is labor intensive. | |
Harry Boscoe (talk|edits) said: | 8 November 2009 |
| There are "special" rules for Christmas trees. Maybe they apply to palm trees, too.
How come you're so ready to write this off, so to speak, as a "hobby"...? Your "I believe if it was handled as an income generating business then it would fall in the category as a hobby" leaves us wondering how you got to that conclusion, which is, after all, the question that you're asking, best I can figger. How did you get there? | |
| 11 November 2009 | |
| The IRS seems to be pushing the Hobby Loss rules hard lately. Both the Tax Forums and NATP covered this pretty thouroughly. He is not a business, individual looking to use land that is just sitting there. They are palm trees themselves that he is selling not a crop of fruit, ect...from the tree. Once they grow that's all you get from the plant, then its sold. It doesn't take a lot of time to care for these plants...in Florida they will grow pretty much anywhere with very little maintainence. Other types of palms can require time. This income he will get will be only at the 6 year+ mark. I can post some of the info that I received from the NATP class so you know where I am coming from, but I am sure you all know this stuff already. I have the gut feeling if the IRS looked at this they would deny the loss. I have a couple of nurseries that I take care of but this does not fit that profile.
I looked into the tree farming but that pretty much covers lumber from what I remember. Hope this additional info helps, and any additional input from you all would be appreciated. | |
