Business / tax question on weapon expenses

[nova-birdman]

I do engineering and consulting for a variety of customers (private and government) on advanced weapon design and improvement, and part of that is research in LR shooting, weapons, etc that requires me to purchase and use several firearms, reloading equip, ammunition, etc. I know there are others on here who purchase and use the same type of stuff for business, so I was looking for advice on how you claim these items for tax purposes--do you consider expendables as "supplies" and the weapons/equip as depreciating assets, or do you consider them as inventory (that hasn't been sold yet)? Have you ever run into any audit issues? I can easily, and legitimately prove my business includes these activities, so that shouldn't be an issue, but am I missing something?

If anyone has any info or experience, please let me know via post or PM.
Thanks!

 

[Redmanss]

Re: Business / tax question on weapon expenses

You're missing a professional accountant.

 

[Lindy]

Re: Business / tax question on weapon expenses

What he said - ask a tax professional.

I have done both, for various reasons. Ask a tax pro. I aren't one, nor do I play one on TV.

 

[Kells81]

Re: Business / tax question on weapon expenses

Don't worry Lindy, I stayed at a Holiday Inn Express last night. The official answer is, well good luck with that!

See a Very Qualified accountant on this. I would love to be able to write off my "loss" in rifles and shooting every year.

 

[ORD]

Re: Business / tax question on weapon expenses

One more vote on you retaining a professional (be it a CPA or a tax attorney) who can advise you on the legalities of doing what you are proposing to do, and if it is legit, all of the intricacies involved in doing it.

 

[Red Mule]

Re: Business / tax question on weapon expenses

I am a CPA and my answer is "Maybe". I have a number of clients who have weekend farms and ranches that are used for recreation, but they do in most cases have some livestock. The question as to whether the costs can be deducted as farming and ranching expense always comes down to "Is the intent to make a profit, and how much time is actually spent managing the farming and ranching aspect of owning the property, as opposed to using it for hunting and recreation."

I suggest that you find a local CPA to consult with. While there maybe aspects of what you have done up to this point that fall into the probably not deductible category, the CPA you select could help you structure your activities so that all of the items that you mention are clearly "necessary business expenses".

 

[sinister]

Re: Business / tax question on weapon expenses

See your tax professional.

Generally if you are required by employment to regularly qualify with a firearm as part of your job, any costs not reimbursed by your employer to maintain and sustain qualification standards are deductible. If you maintain a consultant business and you are business-licensed and taxed your expenditures are also deductible.

If you shoot, load, and provide advice but you are not paying taxes on your services (either on payroll or on a 1099 as a consultant or contractor) generally your costs are in pursuit of a hobby or sport and NOT deductible.

 

[Lindy]

Re: Business / tax question on weapon expenses

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">If you shoot, load, and provide advice but you are not paying taxes on your services (either on payroll or on a 1099 as a consultant or contractor) generally your costs are in pursuit of a hobby or sport and NOT deductible.</div></div>

Which is another way of saying that if the portion of your business income related to shooting does not exceed your costs related to shooting, i.e., you're not making money at it, eventually you will run afoul of the IRS.

Obviously a business need not make money each and every year - Amazon.com ran a long time before turning a profit - but it had better be pretty clear that the intent to turn a profit is there, or you'll have a problem.

A tax professional can sort out the intricacies of that for you.

 

[nova-birdman]

Re: Business / tax question on weapon expenses

Thanks for all the info, I have a call in to my tax attorney.
To further clarify, yes, I do earn taxable income on these and related activities (the total firearm related expenses are less than 25% of total income from those sources, and total expenses are less than 50%), I do research and dev. On advanced weapons, optics, etc, and needed both equipment and expendables to both get background (you can't fix problems until you discover them, so I have a few operator sources, and then try things myself), and experiment. Based on that, and the low expense to income ratio of the business, I think I should be fine.

The work is growing, so I need to talk to a CPA and lawyer anyway to set up a Corp to better delineate activities anyway.

 

[chris112]

Re: Business / tax question on weapon expenses

Yes on the tax professional. In the event of an audit one of the things that will be looked at will be where you are getting certain types of advise. Tax or legal advise get from someone that you can show should know what they are talking about.

As for the "expendables" they are supplies not inventory. Inventory consists of items acquired or produced to be sold.

The fastest way to make sure those "expenses" are deductable is to show a profit. Even if it is only $1. Part of your problem is that very few people are doing that as part of a business but a lot of people do it as a hobby and the IRS keeps that very much in mind.

Good luck.