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Old 09-18-2018, 02:55 PM   #1
Andy Asaro
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Horses running a few times/retiring is a SYMPTOM of problem,not the actual problem

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Old 09-18-2018, 04:42 PM   #2
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Originally Posted by Andy Asaro View Post
Heck this has been the trend since the 80's.
When purses for 2 year old stakes began to rise ot the level of 3 year old stakes,. And people such as Robert Sangster ......https://www.telegraph.co.uk/news/obi...-Sangster.html
and other breeders were willing to pay millions at yearling sales just because a colt or filly was regally bred, the industry went from breeding to race to racing to breed.
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Old 09-18-2018, 05:13 PM   #3
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"Until the fundamental business realities(read: PROFITS) shift from 💰on breeding side to 💰for racehorses that actually race in horse races, things gonna keep going as is"

If owners racing horses made more money it would necessarily be a big positive for breeders. Can't see the problem being solved by raising the purses.
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Old 09-18-2018, 10:43 PM   #4
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I saw the $250,000 yearlings sell one after another, after another and after another at the recent Keeneland sale.

The President's new tax policies are helping drive some of that.

Here's the two top changes as they relate to owning horses.

50% Bonus Depreciation
The 50% bonus depreciation applies to new property purchases, including yearlings, when original use of the property begins with the taxpayer. The full 50% bonus depreciation write-off is allowed regardless of when in 2017 the property is purchased, if it is placed in service before January 1, 2018. The 50% bonus depreciation changes to 40% in 2018 and 30% the following year.

$500,000 Expense Allowance
Now permanently in effect, this allows for the write off of up to $500,000 in new or used property. In order to qualify, the property must be both purchased and placed in to service. The expense allowance can only be used against taxable income from the horse business or any other business from which the taxpayer has income, including salaries. It is reduced dollar for dollar once qualified investments exceed $2 million.


* Depreciation is ultra-valuable in our current economic upturn.

I'm not current, but the idea here is to distribute passive losses to the Horse Buyer (Owner). Example, A yearling is purchased for $250,000, and we spend another $75,000 on housing and training for 9 months.

For example, sakes, the colt races and wins $325,000. The amount equal to your investment.

With depreciation you would still show a loss taking the accelerated depreciation schedule., as the language of the law reads
or any other business from which the taxpayer has income, including salaries.

A successful person with shit-tons of income from salary, 1099 income, capital gains, etc... Would write off the phantom losses from Depreciation and his non-passive income would be tax free.

If you're dentist, the money you earn at dentist work is non-passive. Income from Horses, or other investments unrelated to Dentistry is Passive Income.

Under Presidents Trumps new tax policy, he's loosened depreciation.

Old law was that you could only off-set passive losses with passive income. Under the new law, you can offset your MAIN income, (non-passive).

One of the functions that horse racing partnerships perform is to administer the disbursements of tax benefits to the members.

Many of the larger partnerships consistently shoot for paper losses.



If you've been around long enough then you recall Reagan did the same thing in the 80's. He introduced double accelerated depreciation and it sparked an economic boom in Real Estate and other passive assets.
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Old 09-19-2018, 01:27 AM   #5
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If you've been around long enough then you recall Reagan did the same thing in the 80's. He introduced double accelerated depreciation and it sparked an economic boom in Real Estate and other passive assets.
Yeah, ACRS, and then he took that away with the '86 Tax Act. Recapture was introduced in that gem. The worst move by Reagan that I recall. Good/great otherwise.

Of course, it was another classic example of the Dems playing Lucy with the football. They were promising an expense cut in return, but.....never happened...so sorry, sucker!!!

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Old 09-19-2018, 10:03 AM   #6
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Yeah, ACRS, and then he took that away with the '86 Tax Act. Recapture was introduced in that gem. The worst move by Reagan that I recall. Good/great otherwise.
That's why I posted this in why horses only running for 2-3 years.

When you take the full value of the asset in 2-3 years using accelerated depreciation, vis-a-vis the animals economic value is consumed. Racing makes no sense.

So when you see a $450,000 yearling purchase running in a 40K claimer after 2 years, do not worry about those owners losing $450,000+, they've exhausted all the tax benefits and probably done very well.

Quickie tax benefits create booms because everybody is buying.. but inversely they also create Busts because they need to be sold after the quickie benefit is used.

People buying at the same time = Boom.
People selling at the same time = Bust.

Last edited by Fuss; 09-19-2018 at 10:04 AM.
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Old 09-19-2018, 01:01 PM   #7
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......Old law was that you could only off-set passive losses with passive income. Under the new law, you can offset your MAIN income, (non-passive)....
Your understanding of the new tax law is 100% incorrect. The passive loss rules were not changed to allow an offset against other income. You should delete your post so other uninformed people don't use it as a reason to make a horse buying decision.
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Old 09-19-2018, 01:14 PM   #8
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Originally Posted by Clydepuckett View Post
Yeah, ACRS, and then he took that away with the '86 Tax Act. Recapture was introduced in that gem. The worst move by Reagan that I recall. Good/great otherwise.

Of course, it was another classic example of the Dems playing Lucy with the football. They were promising an expense cut in return, but.....never happened...so sorry, sucker!!!
Recapture was on the books long before 1986. ACRS went away in 1986 but was replaced by MACRS. Certainly not a reason to buy nor sell horses.

What the 86 Tax Act did bring was the passive loss rules and essentially the demise of most tax shelters. Racing got caught because virtually nobody makes income from horse ownership for racing purposes. Probably the best move by Reagan!
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Old 09-19-2018, 01:19 PM   #9
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That's why I posted this in why horses only running for 2-3 years.

When you take the full value of the asset in 2-3 years using accelerated depreciation, vis-a-vis the animals economic value is consumed. Racing makes no sense.

So when you see a $450,000 yearling purchase running in a 40K claimer after 2 years, do not worry about those owners losing $450,000+, they've exhausted all the tax benefits and probably done very well.

Quickie tax benefits create booms because everybody is buying.. but inversely they also create Busts because they need to be sold after the quickie benefit is used.

People buying at the same time = Boom.
People selling at the same time = Bust.
Nobody sells an asset worth $450,000 for $45,000 just because the asset is fully depreciated.
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Old 09-19-2018, 01:33 PM   #10
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Your understanding of the new tax law is 100% incorrect. The passive loss rules were not changed to allow an offset against other income. You should delete your post so other uninformed people don't use it as a reason to make a horse buying decision.
I'm uninformed likely because its not my core knowledge base. I picked it up on the Centennial Farms website. I have some limited experience with selling passive losses and know enough to be stupid about it.

In reading this


The expense allowance can only be used against taxable income from the horse business or any other business from which the taxpayer has income, including salaries. It is reduced dollar for dollar once qualified investments exceed $2 million.


So quite likely I have expense deduction or passive income incorrectly labeled or worse.

Just from that language I concluded changes to passive income, but thanks for the lesson. Being uninformed sometimes leads to being better informed, so thank you.

http://centennialfarms.com/investor-info/tax-benefits/

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Old 09-19-2018, 01:44 PM   #11
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Originally Posted by Clydepuckett View Post
Yeah, ACRS, and then he took that away with the '86 Tax Act. Recapture was introduced in that gem. The worst move by Reagan that I recall. Good/great otherwise.

Of course, it was another classic example of the Dems playing Lucy with the football. They were promising an expense cut in return, but.....never happened...so sorry, sucker!!!
And this is classic example of a question that was previously answered on this thread as the result of Trump's Tax Act somehow gets twisted into another attack on the Democrats. There is another section on this site for political commentary.
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Old 09-19-2018, 01:46 PM   #12
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Nobody sells an asset worth $450,000 for $45,000 just because the asset is fully depreciated.
Its an outermost example (most distant from a center) to emphasize the point. Almost like an antonym.

Thanks again.
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Old 09-21-2018, 08:13 PM   #13
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Economics aside, another part of the problem is that certain pedigrees and bloodlines have become dominant thanks to the highly artificial selection process imposed by the sales/commercial aspects of racing. As a result, people are buying a product (horse) that is no longer physically capable of performing the way it used to. Even if the 1980s trends placed too much emphasis on yearling sales and two year old sales, the campaigns for two year old horses back then still were more rigorous than the entire careers of many top horses today.

Then you have the "less is more" theories now employed by trainers, which doesn't build a decent foundation... but that's another ball game right there.
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