IRS Socks It To NYRA

[Pace Cap'n]

NEW YORK -- The Internal Revenue Service is seeking $1.6 billion in taxes and penalties from the bankrupt New York Racing Association, a major hurdle for the group's bid to exit Chapter 11.

But in a filing Tuesday with the U.S. Bankruptcy Court in Manhattan, NYRA, which owns and operates the three biggest race tracks in New York state, said it owes the IRS no more than $5 million.

Among other things, the IRS said the NYRA should have reported the "handle," or all the money bet at race tracks and offsite betting locations as income on its tax return. The NYRA only reported a portion of those proceeds, its "takeout," as income on its returns.

The IRS is known for being a llittle goofy sometimes, but how in the world could they take the position that money taken and held for payment pending the outcome of wagers income? Banks aren't taxed on deposits, why should a racetrack?

This could be huge.

sports.espn.go.com/sports/horse/news/story?id=3090330

[DeanT]

That is hilarious.

Someone should take an IRS agent to the track. All will be well.

[Turntime]

For the IRS, it's perfectly acceptable to have laws that are unfair as long as 'gambling' is involved. When paying taxes on Horse Racing activities you must count total $$ cashed as gross income, then subtract your wagers (losses) on Schedule A. Not a problem except that once you reach a certain level of gross income you start to lose your deductions. You could then find yourself in the silly position of having lost money for the year and having to pay the IRS thousands extra to boot. And, unlike other business ventures, you can't claim a loss or carry losses over to another year. For those horseplayers that think of themselves as 'investors' and not 'gamblers', the government does not agree with you.

What the IRS is doing to NYRA sounds a bit similar. I wonder if counting the 'handle' as gross income might change the tax rate or limit deductions in some way. Interesting to see how this turns out.

[gIracing]

well, the money to fund the war has to come from somewhere

there is no way this stands up.

If it does, banks will have to start reporting all deposits as revenue

Every track in the country will have to start doing hte same, which would put tracks out of business, which would drive up the unemployement, which won't happen

It could get as silly as even coin machines would then, all money put in to get out change could be seen as revenue.

It has to stop somewhere. this is nothing more than them kicking NYRA while they were down. Now, I'm not a NYRA fan, but just no.... the IRS needs to look in the mirror.

Why not work with the industry, like europe does, drive more people to gamble and make more moeny out of it THE RIGHT WAY instead of milking a 70 year old woman

[OTM Al]

I know the IRS is a federal level organization, but the timing of this makes one wonder if certain state senators had some involvement in nudging this along to help discredit NYRA. Perhaps one needs a tin hat to believe this, but it does come at a convenient time for some....

[harnesslover]

Originally Posted by Pace Cap'n

The IRS is known for being a llittle goofy sometimes, but how in the world could they take the position that money taken and held for payment pending the outcome of wagers income? Banks aren't taxed on deposits, why should a racetrack?

This could be huge.

sports.espn.go.com/sports/horse/news/story?id=3090330

$5 MILLION versus $1.6 BILLION?? That's a bit of a gap.. Good god

[trigger]

"The IRS case involves four other areas of taxation. They are:

— The IRS asserts that NYRA should not have deducted a portion of stakes and purses because it believes they are paid, at least in part, out of the gross handle, which is not reported as income by NYRA, and not out of NYRA’s takeout, which is reported as income. As a result, the IRS believes NYRA understated taxable income by $541-million.

— The IRS asserts that NYRA should not have deducted what it believes is NYRA’s own portion of stakes and purses because it believes that allocations and payments were coming from gross handle and not from NYRA’s own funds. In this area, the IRS believes NYRA understated taxable income by $151-million.

— The IRS asserts that NYRA improperly deducted payments to backstretch workers, who are employed by horsemen and who are not NYRA employees. Deductions totaling $6.9-million should be disallowed, the IRS maintains.

— Ross wrote that the IRS believes that New York’s off-track betting facilities receive “such a grand benefit from the shared pool of NYRA races and offer nothing in return, [so] there must be some form of cost allocation.” Accordingly, relying on Internal Revenue Code, the IRS allocated to OTBs a portion of NYRA’s expenses based upon the percentage of handle generated by OTBs. The IRS believes deductions totaling $347-million should be disallowed."

http://www.thoroughbredtimes.com/nat...s-on-NYRA.aspx

[kenwoodallpromos]

"Ross wrote that the IRS believes that New York’s off-track betting facilities receive “such a grand benefit from the shared pool of NYRA races and offer nothing in return, [so] there must be some form of cost allocation.”
What does this mean in plain English?

[trigger]

Originally Posted by kenwoodallpromos

"Ross wrote that the IRS believes that New York’s off-track betting facilities receive “such a grand benefit from the shared pool of NYRA races and offer nothing in return, [so] there must be some form of cost allocation.”
What does this mean in plain English?

I'm guessing....the IRS is saying that the NYRA is providing services to the NYOTB's for free (i.e. a gift) and, that's all fine and good, but the feds are not going to pay for NYRA's largess by allowing NYRA to deduct the cost of the free services to the NYOTB's from NYRA's bottom line (and reducing taxes paid).
Any comments from CPA's out there?

[kenwoodallpromos]

So far to me it sounds like NYRA is claiming there free service should be considered a chariity deduction and deductible.

[Brisson]

at first i laughed at the IRS point of view, after reading a bit further, its not so laughable, they make some very valid points..... $1.6 BILLION !!!...OUCH !!!.....That would be GAME OVER

[OTM Al]

It would be game over for the sport, not just NYRA.

[gIracing]

horse racing survived the great depression, world war 2 and D Wayne Lukas. I'm sure it will find a way to get past a little tax fraud.


I'm with the previou sposter.. lauged at first but after reading.. they make some valid points. you can't run an entire side business and not pay taxes on it.

Game over? more like FINISH HIM!!

[Premier Turf Club]

Originally Posted by OTM Al

It would be game over for the sport, not just NYRA.

That's correct. Every track, ADW, OTB, etc. would be forced to close immediately if the IRS' position was accepted by the courts.

[highnote]

Originally Posted by Premier Turf Club

That's correct. Every track, ADW, OTB, etc. would be forced to close immediately if the IRS' position was accepted by the courts.

Unfortunately for us handicappers there are a lot of people in this country who would love for gambling businesses to close up shop immediately.

One problem I have with all of this is, why the hell did it take the IRS so long to make this ruling?

Does that mean all money that goes into slots at Yonkers is not being accounted for properly. And by properly, I mean by the new IRS rules.

In the end, if the government of NY wants to own the racetracks badly enough they will find a way to do it. Now, what happens to the tax debt if NYRA does not own the land? Does that mean the state of NY is going to pony-up 1.6 billion? Does that mean NYRA will get a refund of all the state property taxes they have been paying for the past 30 years?

I always knew the NYRA franchise controversy was going to be one of the big battles of the century. I didn't think the IRS would be the deciding factor, though!