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Buying a bed and breakfast?

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  • Buying a bed and breakfast?

    Does anyone have any tax advice about a completely separate family business venture?  I am the sole bread-winner in my family of  5 (and partially care for my mother as well, I pay half her rent).   Income approx. 400-450k, husband teaches at a college part time but this is just for mental stimulation, not income.  We want to buy property with land and figure out how to house my aging mother with us (she lived with us for 5 years while I practiced, 3 different homes from 1200sf to 3500sf---- we had to make a change for my marital relationship to survive!)

    We have toyed with the idea of purchasing a bed and breakfast mountain lodge, as my husband's background is in running outdoor veteran's events (recreation therapy) and he would love to host events and have guests, I would love to do some equine therapy with our horses, etc.     We could all live in the main home, and the price tag is approx. 1.3M.   We would rent out our current home. No idea about past rental income, etc.  My main question is,   if we planned to make a slight profit over the next few years (ie, having guests only part-time, and the veteran's events would just be to cover expenses for the events) -- does anyone know if/how this would be advantageous to offset some of my tax burden from practicing medicine?

    Thanks - sorry this is not very specific!  Just trying to figure out where to start for advice.


  • #2
    Why would the marital situation be better now than in the past with your mother living with you?


    • #3
      Are you going to be living in the lodge and hosting people in it. Will you be living in a separate house from the lodge. Will you mother be living with you in the house, or in the lodge separate from the house, or all of you living in one big lodge.

      I would not recommend the house and lodge be the same entity. Finally running the lodge as a bed and breakfast business is hard work and you might lose more money than what you might expect to save in "tax", if any exists.


      • #4
        Well, if you’re making a slight profit, that will only increase your taxable income rather than offset any tax burden from practicing medicine. This would be a tricky situation with you living in the property and not going all out to make money. Hobby loss comes to mind.

        I would consult with an experienced CPA (perhaps you already have one?) before choosing to take on this situation. A lot is at stake, obviously, and if one of the motivating factors is to have your mother live with you again, you could be adding more stress to the marriage. B&Bs are tough work and it takes a special kind of personality to feel gratified doing hosting/cooking/cleaning/maintenance/marketing over the long term. The owners who seem (to me) to be happiest are retirees who enjoy having company all the time, where both spouses pitch in.
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


        • #5
          You make half a million dollars per year practicing medicine. Buying a bed and breakfast seems like an expensive and distracting money pit, and to tie it up with your mother makes it worse. Unless your plan is to just live there rather than to run it like a business, I'd stay away.


          • #6
            Perhaps by living in a bed and breakfast, the mother-in-law will somehow fade into the background as another guest?

            Yeah, like Johanna said, if you're making money, it's probably going to add to your taxable income.

            This sounds very complex... if you actually do it, only do it after consulting with CPA, attorney, going to a few bed and breakfast conventions, etc.  I.e., eyes open.