In 2006 I started the process of starting a dog breeding business. I purchased a couple dogs, built a large kennel area, and started the process of training and showing the dogs. This obviously cost a lot, including the vets, trainers, stud fees, food, supplies, licenses, show fees etc. I did not include it on my 2006 or 2007 return because I had not started earning income yet. I had already spent $40,000 by 2008.I am treating the whole thing like a business, separate accounts, advertising, etc. Anyway,here are my questions:
1- Can I go back and ammend those returns? Business, vs hobbie issues?
2- Schedule C for those years with no income?
3- Show fees are very large, but without the champion lable these dogs will not produce much income.
Based on what you say, the answer to all four questions is yes. (#3 isn't a question, but #1 is two questions.)
A tax professional could help you support your claim of "treating the whole thing like a business." There is a lot of IRS guidance on that topic and it is worth putting substantial effort into giving them what they want. Separate accounts and advertising are not by themselves enough to overcome the fact that you continue to throw money into an unprofitable activity. This is true not only for tax treatment, but for the basic business issues as well.
Obviously you do NOT have separate accounts, since you are funding this project with other money. Advertising is important, but you would do the same for a hobby.
My first reaction was that with only two dogs you are not operating on a professional scale, and can't have a bona fide expectation of profit. What you are doing looks like an expensive hobby, which is by far the most common approach to dog breeding and shows.
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