When a 4-H or FAA youth raises a show animal for a livestock project and eventually sells the animal at a Fair's livestock auction, what are the tax consequences consequences for the youth?
Keeping in mind that the purchase price and sales prices of show animals have little or no relation to the going market price of that type of animal. For example: the youth might purchase a show quality feeder calf weighting about 300-500 lbs. for $1000-3000 - many times the going on-the-hoof price for feedlot quality calfs. They will put $600-1000 of feed and a lot of work into the animal. At auction the (now
1200-1300lb.) steer might sell for $3-$10/lb. (or higher).The premium price paid by the auction bidders is to recognize that the youth has put a lot of time and work into the project and is selling a high quality show amimal.
How (what forms) should the youth (or his/her parents) account for the profit (or loss) from the livestock project?
Does this in any way fall under the so called "kiddie tax"?