I would ask Mr CPA if he will sign a contract saying he would take care of all interest and penalties should the IRS come back and disallow the deductions

Good for you Kingpin! I applaude you for being professional! Sincerely.

However, I think you are in the minority. Certainly folks who are tight about their operations, and especially for those where deer leases are a bonafide business, I would hope that they treat it as such.

But there are a LOT of farmers and ranchers who are not in the deer lease business and think of the money from deer leases as just some side cash (and don't tell momma!). More often that not, these landowners don't even have formal lease agreements, lease permits, and the whole "hunting lease" is handled by a trusted friend who simply does it on the side as "lease manager". Many times it is the lease manager, not the land owner, that comes up with the lease rules, etc. This is because the landowner just doesn't want to get involved directly and just prefers to get a little walking around money.

If those types started treating it as a business, keeping reciepts and tracking income - I am willing to be that a lot of them would say it just not worth it to them. It suddenly become "formal" to them. If they did pursue it formally, then they would get more involved, put more rules in place, and almost certainly up the price to cover the additional taxes and headaches of the paperwork - or simply say "sorry, I am not leasing anymore".

The overall result is that we hunters would lose out.

I, personally, would rather keep it informal and private - even on the down low - and get acreage for a few bucks an acre. And maintain a good relationship with the land owner and lease manager.

Before I would try to some gray area tax stuff to get a tax write-off, I would be SURE to talk to the parties involved and make sure my actions wouldn't be against their wishes or put them in a jackpot. Especially if there were other lease members involved. To do something like that to gain a little bit of money personally at the potential expense of others is just unthinkable for me. I would consider it impolite and selfish. But that's me. I wouldn't even bring it up for a few hundred dollars savings.

On the other hand, if I was paying $15,000-$30,000 for a corporate type lease - where the tax saving could be significant, I might talk with the lease manager and landowner about the possibilty and get their feedback.

Food for thought - if you claim the rent, even if you can do it strictly kosher and legal. Your deduction of rent means the landowner must be showing it as income.

You could trigger an audit of the landowner - which might not make him very happy. You could end up causing problems for EVERYONE.

If I was the landowner and one of my lessee tried that, and it ended with me getting audited, perhaps having to pay back taxes and penalties - that would be last time I dealt with the lessees and maybe leasing my land at all.

Exactly! I would say that more than 90% of landowner - and lease managers - take the income from leasing hunting rights "under the table". Traditionally always the way it has been - kinda like income from GarageSales. While "technically" the income should be reported in both cases, very few actually do.

But just like GarageSales - where some jackwagon made a deal about on their taxes - the IRS got to looking at the number and dollar volume - along with the cities - and suddenly decided it was worth their while to start cracking down on all those Moms having garage sales. Really affected things with new laws, city ordinance, permits, etc.

There is even more money involved in deer leases. Somebody due something stupid like trying write off the lease cost on the taxes and folks follow suit - then first thing you know the IRS is going to start looking into closely (especially under the current administration) and start going after those nasty farmers and rancher "criminals" who haven't been paying their taxes.

All it will take is a few ranchers get burned by that, and the whole idea of leasing will change. Taxes and penalties are severe on back taxes. For example, lets say a land owner has been getting $10,000/yr for his 1000 acres and has been doing it for 20 years. IRS comes after him and claims he owes taxes on $200,000 of unreported income. With the base taxes, interests, and penalties - he nows owes the IRS more than a million dollars (very conservatively). He ends up losing his ranch - all because some nimrod tried to claim his lease as an expense. The rancher's neighbors hear what happen - and figure it's not worth the risk of some lessee playing tax games - and decides he is not going to lease anymore. Then regular as dominos other ranchers follow suit - or go through the complicated process of getting/giving receipts for lease payments - which jacks up the cost of the lease.

Next thing you know, leases are either sky-high even more than they are now - and most land is simply not available to lease anymore.

Just because some jackwagon wanted to see if he could save a few hundred bucks on his taxes.

And to whose who say - "why should I be responsible if the landowner doesn't pay his taxes or reports income?" - let me remind you that leasing is a PRIVILEDGE granted by the land owner, and you have should have respect for him and cater to his desire to keep things private. When you put your desire to scam saving a few bucks off your taxes ahead of the private arrangement with the landowner, you become selfish and not welcome.

Remember, most ranchers/farmers probably claim there lease income from grazing, etc. but most do not claim hunting lease income. This is because often the "lease" is managed through a ramrod and not the landowner directly. This adds a level of complexity for tracking/reporting income - as the lease manager/ramrod needs to report the income share himself. Most ramrods aren't making that much money - certainly not a career income - they aren't going to turn 20-30% over to the government - especially for all the cr-p they have to deal with. It won't be worth it to them - so again, prices will go up or land taken off the lease market.

I betcha if you even MENTIONED what you are thinking of doing to the land owner, he would kick you off the property so fast it would make your head spin.

My CPA is allowing me to deduct the cost of our deer lease as "Rent" on a LLC Schedule K-1 statement.

Here is my reasoning. I operate a gun-related business. We lease part of a large ranch for testing guns and optics. The ranch has a formal gun range for bench work plus we real-world performance test on deer and hogs. We also invite industry-types to come down and demonstrate their new products. Obviously you can't easily test guns in a regular office building or warehouse - thus the ranch "rent."

We are claiming "Rent" much as if we leased a building in town or leased a gun range. The ranch is where we conduct our business.

We don't claim it as "Entertainment" due to this IRS statement, "Business is generally not considered to be the main purpose when business and entertainment are combined on hunting or fishing trips, or on yachts or other pleasure boats. Even if you show that business was the main purpose, you generally cannot deduct the expenses for the use of an entertainment facility"

I'm sure lots of guys on here have corporate or business-related leases. How do you handle it with the IRS?

I have never received a 1099 from anyone on the lease and do not expect one since it is not a business related expense on their part but I try to keep my ducks in line. Each and every dollar of income and expense related to my hunting enterprise is documented by checks, receipts, invoices, etc. No cash involved. To do otherwise is insane�plus darned poor business.

Food for thought - if you claim the rent, even if you can do it strictly kosher and legal. Your deduction of rent means the landowner must be showing it as income.

You could trigger an audit of the landowner - which might not make him very happy. You could end up causing problems for EVERYONE.

If I was the landowner and one of my lessee tried that, and it ended with me getting audited, perhaps having to pay back taxes and penalties - that would be last time I dealt with the lessees and maybe leasing my land at all.

I work out of my home. By the lease logic, I could claim my entire home as a deduction, but in reality, all I could claim (and I don't) is the small area of my home office. As my accountant noted, such deductions are red flags. They may not be wrong, but often garner extra scrutiny (audits) that nobody wants.

I would not try to claim the entire deer lease just because you sometimes test guns on a gun range that is undoubtedly only a very small fraction of the entire lease.