DaveG
Mame
I'm not so sure about that.
I'm at a phase in my bonsai development where I need to start working with better material, and I am more confident in my ability to keep it alive. So I'm planning on buying a fair number of high quality collected trees and pre-bonsai over the next 5 years or so.
So let's say I plan on spending $10,000 over the next 5 years on trees. Add in about $2000 for quality pots to go with the trees. $1000 for soil, fertilizer, water bill etc. $1000 for a few nice stands and scrolls. $1000 for tools (gotta get an ichiban! ) and other misc stuff for a nice round number comes out to $15000 over a 5 year period.
If instead of spreading that out over 5 years, I buy it all in 2 years, as a business expense, and deduct it on my taxes, it ends up only costing me aprox $9 - 10,000 because of the decrease in my taxes (if I'm understanding things right, and I'm no accountant so maybe I'm not.)
So I've saved $5000 over a 2 year period. I then sell a couple of my older semi-crappy trees at club meetings and so on for the next 3 years, thus showing a profit for 3 out of the 5 years, meeting the criteria for business instead of hobby.
So as long as the costs of starting and running the business are less than that $5000 in tax savings, I've come out ahead. Right?
- bob
From the way you've described it, some modification of this plan may be necessary in order to make it look like a business to the IRS if they showed up and knocked on your door. Specifically, they could ask why certain purchases (pots and plants you intend to keep) are business expenses if they're not up for sale or contributing to the business in some other way. Bonsai tools, water, and soil components are probably inherently safer. Of course, if you're both buying and selling some of these trees, the IRS would have less ground to stand on in a disagreement. And it's easy to argue that some trees just aren't quite ready for sale yet. Have a plan in mind about what you're going to tell them if asked and try to be sure you're not just kidding yourself about it sounding convincing.
If you get this to work in your favor, the knowledge of how you did it would make an awesome guide.