Deer Hunting Ranch- Are Deer depreciable or inventory

Technical topics regarding tax preparation.
#1
RowTax  
Posts:
287
Joined:
15-Jan-2018 3:45pm
Location:
Florida
Client owns a deer hunting ranch in Texas. People pay good money to come hunt. Tall fences so they can't jump out. Are the cost of deer purchased a depreciable item? Or perhaps inventory and when shot or they die of natural causes (lighting, etc) then they become cost of good sold?
 

#2
Posts:
8152
Joined:
4-Mar-2018 9:03pm
Location:
The Office
RowTax wrote:People pay good money to come hunt. Tall fences so they can't jump out.


The people or the deer?
 

#3
Posts:
2353
Joined:
13-Sep-2014 9:37am
Location:
U.S. Capitol
It's the deer just as long as the people are paying *good* money. "Bad" money voids the deal.
 

#4
MIKEB  
Posts:
106
Joined:
17-Jul-2014 10:52am
Location:
Co
RowTax wrote:Client owns a deer hunting ranch in Texas. People pay good money to come hunt. Tall fences so they can't jump out. Are the cost of deer purchased a depreciable item? Or perhaps inventory and when shot or they die of natural causes (lighting, etc) then they become cost of good sold?

Sounds like inventory. Like food in a grocery store, only that you have to catch your food.
 

#5
Lmaris  
Posts:
155
Joined:
20-Jun-2017 8:00am
Location:
Texas
So canned "hunts", as sporting as shooting Hereford cattle.

They're farming deer instead of cattle. Rather than ship the livestock to the slaughterhouse, People who want to pretend to be hunters come and cull them.
 

#6
RowTax  
Posts:
287
Joined:
15-Jan-2018 3:45pm
Location:
Florida
Indeed....But, client says the deer roam the thick forested land and therefore he can't get a good count of the so called inventory at December 31, or any other time. Way back at the university, 30 years ago, my auditing professor told us about a pharmaceutical company that has an island off the coast of Florida, where they have the monkeys that they test with drugs just roam free on the island and they don't swim to the mainland. He said that they were a company asset, but how do the pharmaceutical company count that asset? They fly above the island at feeding time and take a picture and from the picture, they make a count. Hunting ranch guy says they can't do that because the trees are too thick.

It is not a breeding ranch for these deer and yet they do reproduce . Seems like if it was inventory for the deer that are purchased from a breeder, that that cost might be divided by some kind of count and then the cost of goods sold maybe could be done based on dead deer.
 

#7
Posts:
8152
Joined:
4-Mar-2018 9:03pm
Location:
The Office
How much do the deer cost to the ranch?

If they're depreciable property, DMSH comes into play.
 

#8
Posts:
8152
Joined:
4-Mar-2018 9:03pm
Location:
The Office
Spell Czech wrote:It's the deer just as long as the people are paying *good* money. "Bad" money voids the deal.


I was more asking about who *they* are below. The deer or the hunters. :lol:

RowTax wrote:Tall fences so they can't jump out.
 

#9
Nilodop  
Posts:
18754
Joined:
21-Apr-2014 9:28am
Location:
Pennsylvania
Inventories
... are necessary in every case in which the production, purchase, or sale of merchandise is an income-producing factor.
(Regs.). Are the deer merchandise? How is merchandise defined? Do the hunters pay for the merchandise or for the chance to hunt? Are they selling deer or hunting rights?
 

#10
CrowCPA  
Posts:
402
Joined:
25-Apr-2014 3:27pm
Location:
New England
Can the stock be accounted for as non-incidental materials and supplies? I know there is a gross receipts test to be able to use this method, but if the business qualifies then the cost is deducted at the latter of when it is paid for or when it is used in the trade or business. I would argue that as soon as the livestock is released into the hunting area it is being used in the trade or business. Being out there to be shot at should be enough.
 

#11
Nilodop  
Posts:
18754
Joined:
21-Apr-2014 9:28am
Location:
Pennsylvania
I think non-incidental materials and supplies are just inventory with a special treatment, so I still have my questions in #9.
 

#12
MWPXYZ  
Posts:
996
Joined:
23-Apr-2014 3:21pm
Location:
Lancaster NH
Maybe you have a situation analogous to a farm. Some purchased animals that could be either depreciated or "inventoried", animals raised on the "farm" would be "inventoried".

Instead of the owner bringing livestock to the slaughterhouse; the owner has a "pick your own" operation?

https://lawprofessors.typepad.com/agric ... pends.html
 

#13
MWPXYZ  
Posts:
996
Joined:
23-Apr-2014 3:21pm
Location:
Lancaster NH
 

#14
Posts:
8152
Joined:
4-Mar-2018 9:03pm
Location:
The Office
Joking aside, my thoughts align with Nildop in #9.

Are the hunters paying for an experience and a service OR are they paying for a deer?

Do they pay the same price whether or not they get a deer? Whether they get a spike or a 10 pointer?

Seems similar to when a kid goes to an amusement park and gets a free toy at the end.
 

#15
Chay  
Posts:
909
Joined:
22-Jun-2018 1:21pm
Location:
Virginia
A free toy at the end of an amusement park experience could be regarded as included in the ticket price because it's provided evenly to everyone who participates. To me, the deer are more akin to the balloons that kids pop when they play a balloon dart game. The price of entry is fixed, but no one knows how many balloons a kid will pop. Once the balloons are popped, they're no longer useful in the park's trade or business of providing amusement. Who cares if the kid wants to take home the leftover plastic; what's important is the property no longer has any usefulness to the taxpayer.

Surely, balloons would be regarded as incidental materials and supplies. Perhaps the deer are more substantial and should be regarded as non-incidental materials and supplies. But the situation is fundamentally similar, and I don't think they're inventory.
 

#16
Posts:
1004
Joined:
4-Mar-2015 4:37pm
Location:
San Francisco
RowTax wrote:Indeed....But, client says the deer roam the thick forested land and therefore he can't get a good count of the so called inventory at December 31, or any other time.


That argument doesn't hold water. It's mostly a question of whether a bought one got shot yet. The ears are tagged because those are farmed deer. He can just check the carcasses for an ear tag to see if a "wild" or bought one just got popped. Maybe he clips the tags so his customers can pretend they shot a real deer but he can stop doing that.

Then taxwise it's a cattle ranch basically, where people can come in and shoot the cattle. I believe that means inventory with option of depreciating because they're also used as breeding stock. With the same inventory-tracking issues as a cattle ranch, wandering off through broken fence, death by cougar, etc.
 

#17
RowTax  
Posts:
287
Joined:
15-Jan-2018 3:45pm
Location:
Florida
Client says only very few deer have ear tags. Further says There is a minimum cost. But that cost changes based off of what kind of animal they shoot and the size of that animal. 2500.00 is bottom end 20,000 would be top end. He is adamant that he cannot get anywhere near an accurate count.
 

#18
sjrcpa  
Posts:
6475
Joined:
23-Apr-2014 5:27pm
Location:
Maryland
So what does he have besides deer?
Would someone pay even $2,500 to shoot a deer?
 

#19
Posts:
2772
Joined:
22-Apr-2014 1:34pm
Location:
North Carolina
I am not sure of the answer as to if they are inventory or not, but I am thinking along the lines of tb_in_sf. If the deer are tagged when purchased and released, and then you track the ones that are tagged when they are killed and removed after the hunt, you should know what is left at year-end.

Also wondering who would pay $2,500 or more to shoot deer?
 

#20
RowTax  
Posts:
287
Joined:
15-Jan-2018 3:45pm
Location:
Florida
He did say that almost no deer have tags or any way of tracking them and that plenty are born on the ranch. Not recent purchases, but prior CPA's have handled the purchases both as inventory and as depreciable assets. No, I have some what whipped him into better compliance, and want to treat these deer more consistently.

Also, he has people come from all over the US and some international sportsman who pay high fees to hunt there. Meanwhile, we are trying to stay out of the IRS gun sights.
 

Next

Return to Taxation



Who is online

Users browsing this forum: CaptCook, golfinz, HowardS, JAH, JoJoCPA, KoiCPA, lckent, MAPCPA60, SALYstrikesagain and 211 guests