>We HAD to declare any income from any sales; but were not allowed to take any expense deductions for our hobby, unless we could PROVE it was a business, AND made a "reasonable profit" (Reasonability determined by IRS) 3 years out of 5. (A special IRS rule for easily abused "businesses" that are normally considered hobbies.)<
There was a law we worked to defeat this year (in Virginia) that had a clause written in that exempted anyone who bred dogs "not for profit". The problem is, in another part of the law, taking money of any amount could be defined as breeding "for profit". Profit does not necessarily mean you make more than you spend, it seems.
Good, ethical breeders don't make more than they spend on their animals, if they're breeding judiciously, and health testing their animals. If you breed Toys, and have a C-section, your "profit" goes down the drain or into your Vet's pocket. Add a stud fee upwards of a thousand dollars, and you see why we call this a hobby, or a mental illness (chuckle).
We "suffered that mental illness" for over 25 years.
And, no; the dogs didn't bring in any profit, and we would keep any 'pet quality' pups rather than let them go for any price to a home we didn't completely approve of. Spaying & neutering was the rule, not the exception. At times the bed was REALLY crowded!
The point is, the puppy mill IS a "business", and avoids all of those expenses. That is how they make their money.
Stud fee? They own the "stud". Usually an inbred, 3rd generation grandson of their "foundation stock". Ditto for their brood bitches.
Feed? 500 poung bag of Skippy every six months.
Show expenses, local club memberships (wouldn't accept them if they wanted to join!) & breed-magazine advertising? Certainly not!
Prenatal care & supplements for the pups? Not likely.
Medical care? A gunshot to the head if a sick animal looks like it may not recover by itself.
I used to drive a dozen or so times per year past a "----- Kennels" near the OR-ID border. Every time I went by, they would have two or three breeds advertised, and sometimes, "puppies available". Never the SAME breeds, mind you. Finally, my wife and I stopped, to check it out, just to see what kind of stink we could raise.
Turned out the "puppies available" were THEIR show-bred pups, about twice a year; or, litters that were dumped on them. The rest of the advertised 'breeds' were county dogs for adoption, not sale. They (as part of their local dog club's project) were the unpaid, volunteer animal shelter for the county. Two separate operations on one large property.