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Dependent 1099 Misc Income from Livestock Sale

I have a question I haven't seen before. My son raises goats for an FFA/school project and it gets auctioned off at the County Livestock show. He received a 1099-MISC with the auction amount shown in box

  1. The true net proceeds of the sale are actually in the negative due to all of the feed, supplies, etc. necessary to raise the animal. My question is, the money for these supplies was actually paid by us, his parents....how do you handle this and is there ANY way for us to take advantage of these expenditures as my husband and I owe the IRS on our joint return? ANY help would be appreciated!
Reply to
amyismynamey
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I asked this same question back in February

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"I think I may have found the answer.  Pub 225 "Farmer's Tax Guide", in chapter 12, under "Self Employment Tax" of all places, it says that "4-H or FFA project animals..." may be subject to income tax and should be reported on line 21 of Form 1040 with a attached statement showing the gross income and expense and that the net income should not be subject to SE tax."

AFAIK the only thing that can go on a parents return is the "kiddy tax" which must be only interest or dividend income under a certain amount, the 1099-MISC from the auction same does not qualify.

I know that this year my grandkids have already spent much more to purchase their show beef and feed ($16/50 lbs. and they eat 25 lbs. a day) than they will ever recover so they will probably have a large loss after the sale in August.

I also pay for all of the feed and supplies but it is a loan to their project, to be paid back out of their profit (if any).

Reply to
Ernie Klein

Related question that I am still looking for an answer--

Why are County Fairs/Jr. Livestock Shows sending out 1099-MISC forms?

Does anyone know the rule that requires that they do so? It does not seem to be covered in the 1099-MISC instructions.

I have been told that our county will also be sending 1099-MISC starting this year, but they won't cite a requirement for them to do so.

Reply to
Ernie Klein

"Ernie Klein" wrote

Because they should.

Because they don't know.

It's buried in with "Prizes and Awards".

Reply to
Paul Thomas

May not work for you, but for us the costs were absorbed in the overall operation and the kids got the proceeds as their college fund money. (Showing how old a fogey I am, when Dad did that for my brother and I, we put ourselves through school almost completely on the proceeds from one show steer and a couple of feeder heifers per year).

Reply to
dpb

I have read that several times and searched the IRS web site but "Prizes and Awards" and proceeds for an auction do not seem to equate. i.e., if I win (prize) or am awarded (I did something good and am being given an award) of $1000, then I am $1000 richer so a 1099-MISC seems appropriate, but if I purchased something for $999 and it auctions for $1000 the definitions do not seem to fit. It is neither an prize or award, only what a willing buyer is willing to pay at a given time for a given item.

Reply to
Ernie Klein

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