Discuss the below in a 1000 words:
Q: When is a Dairy Farm a Trade or Business? Randolph has been an orthopedic surgeon in New Orleans for 15years. He would like to devote less time to his medical practice, spend more time with his family, and pay less income tax. His net income from his medical practice has been about $500,000 per year for the past five years. Randolph grew up on a dairy farm in southeastern Louisiana. He has many fond memories of his childhood and believes a farm would be an excellent environment for his three children. Randolph purchases a dairy farm across Lake Pontchartrain from New Orleans. He hires two full-time employees to handle the milking operations and other part-time employees as needed. In addition, Randolph and his family participate in performing various activities on the farm. Randolph commutes to New Orleans four days a week to continue his medical practice. Because he is devoting less time to the practice, his net income decreases to$400,000. Randolph has a loss of $75,000 for the dairy farm that he attributes to depressed milk prices and his inexperience at running the farm. He considers the medical practice and the dairy farm to be separate trades or businesses. Therefore, on the Federal income tax return, the $75,000 net loss is offset against the $400,000net income. Assume that the net income and net loss from the medical practice and the dairy farm, respectively, remain approximately the same for the next four years. Is the position adopted by Randolph defensible?
Question: Is the position by Randolph defensible? Review the 9 factors considered to help determine whether an operation should be considered a business or hobby. You may also want to do some outside internet research on the subject, include in your own words and cite your sources.
Instructions:
- Write a detailed memo to Randolph in Word with your research findings to properly advise him on this matter. Your memo will likely be several pages.
- Address the majority of the 9 factors and indicate to Randolph whether each factor is supportive or not supportive of his farming operation being considered a business.
-Based on your analysis of these factors, make an overall conclusion to Randolph.