How do you get a Schedule F loss to not flow through due to a loss being taken in the prior 3 years and instead show as a carry forward loss?

[bschroeder]

The client materially participated in the farm and the investment is at risk.  I don't believe a loss can be shown in the fourth year and I don't see a way to indicate that is the case.

[sjrcpa]

Why do you think he can't show a loss?

and why do you think this year's would get carried forward?

[bschroeder]

The IRS Stipulates that you can typically claim three consecutive years of farm losses.  The IRS considers a farm to be a non-deductible hobby if it doesn't produce a profit for three out of five years.  My client is clearly trying to earn a profit, but has not ben able to in the last 5 years.  As a result, I'm thinking the loss would not be allowed.  Is that not correct? 

If the loss isn't allowed this year becasue there have been losses in the last five years, it could not get carried back so it would need to be carried forward. 

[clr600]

Did it produce any income

[bschroeder]

Yes.  It produced about $8,000 in income but had about $15,000 in expenses.  This has been pretty typical the last five years.

[The_AntiTax_Man]

 @bschroeder The IRS "stipulates that you can typically claim three consecutive years of farm losses" is a guidance. You need to take a look at all of the relevant facts and circumstances of your client's farming enterprise to determine if you have a business or a hobby. 

Since you apparently have previously filed 2016, 2017, and 2018 returns with losses from your client's farming enterprise, what rationale suddenly warrants that for 2019 that the farm is now a hobby and that it is no longer a business? 

Is the farm a real for-profit farming enterprise?  Or is this just your client's hobby horses?    

If this is a legit for-profit farming enterprise you deduct the losses each year as they occur.

[bschroeder · Accepted solution]

I believe the facts of the situation point to the conclusion that his is not a hobby, but a legitimate money making venture.  Things have just not worked out that way for a number of years.  This is the first year I am personally preparing the return, thus the review of the circumstances on my part.  I just wanted to make sure I was handling this properly given the fact that the losses have now occurred in the last 5 years which is beyond the normal scope of guidance provided by the IRS.  I appreciate your thoughts on this.