Dog Boarding Business Expenses

callen215 · ‎February 23, 2023

Scenario - I have a client with a dog boarding business, operating as an LLC. The client uses their home for boarding giving the boarded dogs free roam of the house the same as the dogs would have at home. The client also sells dog supplements and food as a distributor for another company. The client also has their own dogs. The client gives the supplements and food to their own dogs as a true, life testimony to how well the products work.

Question - The client wants to write-off their dogs' food and supplements as expenses of the LLC. They also want to write-off other expenses for their dogs because they argue that they use their dogs in their business. I argue that only expenses directly related to the business can be written off, for example if they use their dogs in advertisement, etc. Am I being too conservative? What is the right answer for these expenses?

Rainflurry · ‎February 24, 2023

@callen215

There is a lot of room for interpretation when it comes to what is a legitimate business expense.

The IRS says:

"To be deductible, Section 162(a) allows a deduction for a business expense if it is both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary. Section 262, however, provides that no deduction is allowed for personal, living, or family expenses."

Like you, I'm conservative so, IMO, the food/supplements are likely not a deduction and the "other" expenses are highly unlikely to be deductible. If both of these expenses were being incurred by your client personally prior to starting the boarding business, it seems like it would be difficult to convince the IRS that they are now legitimate business expenses.

We owned and operated retail stores for many years and it was not unusual to take products from inventory for personal use. However, the IRS is very clear that inventory taken for personal use is not deductible. I could argue that the items taken for personal use allowed me to give testimony to our customers regarding the fit, durability, effectiveness, etc. of the products we sold. However, I highly doubt that would be an effective argument given the fact that, ultimately, the clothing, footwear, equipment, etc. served a personal purpose.

The bottom line is that, if audited, your client would need to prove to the IRS that these expenses served a bona fide business purpose.

View solution in original post

Rainflurry · ‎February 24, 2023

@callen215

There is a lot of room for interpretation when it comes to what is a legitimate business expense.

The IRS says:

"To be deductible, Section 162(a) allows a deduction for a business expense if it is both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary. Section 262, however, provides that no deduction is allowed for personal, living, or family expenses."

Like you, I'm conservative so, IMO, the food/supplements are likely not a deduction and the "other" expenses are highly unlikely to be deductible. If both of these expenses were being incurred by your client personally prior to starting the boarding business, it seems like it would be difficult to convince the IRS that they are now legitimate business expenses.

We owned and operated retail stores for many years and it was not unusual to take products from inventory for personal use. However, the IRS is very clear that inventory taken for personal use is not deductible. I could argue that the items taken for personal use allowed me to give testimony to our customers regarding the fit, durability, effectiveness, etc. of the products we sold. However, I highly doubt that would be an effective argument given the fact that, ultimately, the clothing, footwear, equipment, etc. served a personal purpose.

The bottom line is that, if audited, your client would need to prove to the IRS that these expenses served a bona fide business purpose.

callen215 · ‎February 24, 2023

This help! Thank you for your reply.

FritzF · ‎March 06, 2023

Hi again, Rainflurry.

I appreciate you for always sharing your knowledge about QuickBooks. This will definitely help other users as well in the future. Please keep on posting here in the Community.

Keep safe and have a great rest of the day.

stevenstgerny · ‎July 19, 2023

But its LLC is from another country Like i have a client who also do same type of things but he have different breeds of Dogs and Cats. Is it possible that the expenses my client say written in LLC will also effect the overall tax issue and if so will operating in USA will also affect like giving taxes to USA Govt.

Please If anyone know explain it a bit.

ZackE · ‎July 19, 2023

Thanks for joining the Community and getting involved with this thread, stevenstgerny.

To properly identify if a client's expense will affect their taxes and if they'll need to pay United States taxes while operating in the country, I'd recommend working with a tax professional.

If you're in need of one, there's an awesome tool on our website called Find a ProAdvisor. All ProAdvisors listed there are QuickBooks-certified and able to provide helpful insights for driving your business's success.

Here's how it works:

Go to our Find a ProAdvisor page.
Use the City or ZIP search field to specify a location.
Select Find a ProAdvisor.
Browse through your results and find one that works best for the business. You can click on each ProAdvisor's profile to learn more information about them.

Once you've found a tax professional, they can be contacted through their Send a message form:

Use the available text box to introduce yourself. Be sure to include details about which services you're looking for.
Enter your appropriate info in the Your name, Your email, and Your phone number (optional) fields.
Hit Send message.

You'll also be able to find many detailed resources about using QuickBooks in our help article archives.

Please don't hesitate to send a reply if there's any additional questions. Have a wonderful day!

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