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Conference noted::equitation

Title:	Equine Notes Conference
Notice:	Topics List=4, Horses 4Sale/Wanted=150, Equip 4Sale/Wanted=151
Moderator:	MTADMS::COBURNIO

Created:	Tue Feb 11 1986
Last Modified:	Thu Jun 05 1997
Last Successful Update:	Fri Jun 06 1997
Number of topics:	2080
Total number of notes:	22383

199.0. "Tax Shelters - Business or Hobby?" by PLANET::NICKERSON (Bob Nickerson DTN 282-1663 :^)) Wed Jan 07 1987 12:38

    The question of what type of horse is required to be tax deductable
    was brought up in the dressage notes.  It was suggested that a new
    note be added for this discussion, which is probably appropriate.
    The overall presumption by the IRS for losses related to horses
    or anything else for that matter, is that you are engaged in a bona
    fide business WITH THE INTENTION OF MAKING A PROFIT.  If they think
    that this intention does not exist they will challenge you in tax
    court as engaged in a hobby.  With the signing of the new tax reform
    bill, the complexity of running a business is growing.  For instance
    even if you are running a business and can prove it, and you show
    losses against that business, the new reform states that you must
    be "materially involed".  Unfortunatly the law is so new we can
    only guess as to what extent they will carry this one.  If you do
    all the work yourself, you probably qualify.  If you have someone
    manage a portfolio business for you, you won't qualify.  In between,
    if you board all of your horses out can you qualify?  The IRS says
    that if you make everyday business decisions, then you are OK. 
    There are many more confusing issues that are best left to a tax
    accountant who speciallizes in horses but get ready to spend some
    money.
    
    If you are planning to get into the business, you should seek the
    advice of a professional equine tax consultant like Pat Kani in
    Andover.  It will be cheap if your are only looking for a consult.
    If you do plan to get into the business that first consult will
    be part of your proof that you want to make a profit which is 
    very important !  If you just want to investigate more, there is
    an excellant article in the last issue of Show Horse Magazine on
    this very subject.
    
    Regards
    
    Bob

T.R	Title	User	Personal Name	Date	Lines
199.1	i'm so broke i can't even pay attention!	PHILEM::MATTHEWS		`Wed Jan 07 1987 13:41`	13
	re .0 thanks for the name i couldnt think of it at the time. I have started to investigate that if i use my horse as a broodmare, how can i show her and breed her, and still write some things off. as with any bussiness you have to keep strict records, and as re 0 explained... you must show an intent to make a profit, now the laws says that you have 7 years to show that. will let you know what i find out for 87. wendy.
199.2	I forgot the AHC book!	PLANET::NICKERSON	Bob Nickerson DTN 282-1663 :^)	`Wed Jan 07 1987 17:28`	23
	I didn't think to mention that the American Horse Council publishes a book every year which details some of the finer points of the tax law as it applies to horse businesses. I can't remember the name of it but I went to a seminar in November where one of the authors gave a talk on the new tax reform. Even if you read this you still need to at least consult with an EQUINE TAX EXPERT. Most General CPA's are not well versed in the old law never mind the new. For instance, if you use a non-straight line depreciation schedule, you must keep a record of all pre-production expenses of assets which are put in service after two years. This means that if you breed a mare which you are depreciating (non-straight line) you must keep a record of all expenses incurred from the instant of inception of the foal. Things get curiouser and curiouser... In addition you must apportion all capital costs used to produce that foal as part of the cost basis. This means that foals portion of the depreciation expense of your fences, trucks, barn, etc. If you are confused at this point, you're beginning to get the message. The IRS has a notoriously bad sense of humor which could cost you some money in five to ten years. Be smart and read as much as you can but when you are done reading, GET SOME PROFESSIONAL ADVICE. Bob_living_in_the_shadow_of_the_IRS
199.3	HORSE ATTORNEY	PMRV70::MACONE		`Thu Jan 08 1987 13:08`	10
	I didn't realize this file had been created before I dumped my response in 10. I agree that very few accountants are knowledgeable enough to handle horse businesses....If anyone is looking for a very good attorney who handles a lot of horse people/problems/business call Sherry Gould at Gould Law Offices in Littleton, MA. Sherry is not a bonafide "horse person" but she is now handling so many horse people she is becoming somewhat of an expert in the area. All the horse people I know that deal with her find her to be excellent. Jeannie
199.4	A REAL horseperson/tax expert	NEWVAX::AIKEN	I love Crabbet Arabians! 301-867-1584	`Fri Jan 09 1987 17:35`	8
	I have a friend, Margaret Berger, who is a CPA with a Master's in business. She is a bona fide horseperson -- her Arabian stallion is Atabi Moonfyre, of Colorado fame -- and has saved me BUCKS in taxes. If anyone would like to reach her, send me a DECmail at Merrie Aiken @DCO or mail to NEWVAX::AIKEN. Regards, Merrie
199.5	Info on tax laws?	DANUBE::PORTER		`Wed Jul 13 1988 08:47`	5
	Bob mentioned there is an American Horse Council book on tax laws. Can anyone tell me how to get hold of this book or any other related material. Karen DTN-241-3102
199.6	Contact AHC	PBA::NICKERSON	Bob Nickerson DTN 282-1663 :^)	`Tue Aug 09 1988 13:19`	7
	I don't have the address with me but I'll see if I can find it. I would contact AHC directly and ask them where you can get it along with similar information. The address for AHC is usually published in an ad in Equuis etc. Bob
199.7	Four-footed Deductions?	VMSSPT::PAANANEN		`Tue Dec 05 1989 12:40`	29
	================================================================================ Original Note by: GENRAL::LEECH "Pat Leech CX01/02 DTN 522-6044" 24 lines 5-DEC-1989 10:50 -< Tax deductions >- -------------------------------------------------------------------------------- To realize tax benefits such as deduction of expenses, a Thoroughbred owner must operate in a businesslike manner with a for-profit objective. An unusual case decided recently by the U.S. Tax Court gives insight into how the government determines whether a business is a profit-seeking activity or a non-deductable hobby. Charles O. Givens of Mount Vernon, Ind., is an investment broker. He bred Tennessee Walking Horses for six years, raised cattle for four years, and never ralized a profit from either venture. Givens claimed losses of $42,455, but the Internal Revenue Service denied the deductions. The Tax Court, however, ruled that Givens managed his horse operation in a businesslike manner by maintaining detailed accounts, consulting experts, devoting several hours daily to the activity, etc. The court, though, concluded that Givens did not devote similar attention to the cattle operation. The special judge in the case ruled that Givens can deduct $30,180 of losses from the horse operation, but cannot claim deductions of $12,275 from the cattle enterprise. From The Blood Horse dated Dec. 2, 1989.