George Krikorian Drops Bombshell at CHRB Meeting

[thespaah]

Originally Posted by whodoyoulike

Sounds like from the owners POV, the day rates and the horses running infrequently are two reasons it's difficult owning horses today.

Losses can still be written off for businesses (I know not for hobbies).

Is it that difficult to prove that owning and racing horses are a business and not a hobby?

Is part of the ownership problem because these owners expect their horses when purchased are stakes caliber or at least classy claimers and above when we know that the numbers of classy horses are declining because they are retired early, injuries etc.?

Why aren't horses running more frequently e.g., every two weeks etc.?

So, how does one control day rates?

I have a solution.....It will infuriate some.....I view the trainer's job as a sales person or an incentive driven occupation....
Here's my solution.....Get rid of the day rates. Trainers don't get paid unless their horses collect checks. Or another words. A commission only pay structure. "You want to eat? Then produce"....
In return, give the trainer one third of the purse money. Jock rates stay the same. 10% of the purse earnings.....IMO this will solve two problems. It will make ownership more attractive because the owner won't be thinking "I'm paying this guy $250 per day to keep my three horses in the barn for 6 weeks at a time"....And it will light a fire under the butts of these trainers that think the barn is a warehouse for equines......
Ok...Flame away.....

[thespaah]

Originally Posted by AndyC

And it is a hobby! Should my playing golf be a write-off? Should owning a boat be a write-off? The timing of write-offs does not determine the success or failure of a business.

Just a minute. If owning race horses is one's primary business from which they derive their income, then YES, it is eligible for tax write offs...It is not a hobby. It is their JOB....

[thespaah]

Originally Posted by AndyC

Do you think money earned through labor should have a lower status than money earned by gambling? Why do people think that gambling should get a tax pass?

That money has laready been taxed many times over. Here in the states. governments simply legislated themselves another bite at the apple...BTW, in Canada, lottery winnings are tax free as well

[thespaah]

Originally Posted by AndyC

Silly me, I forgot that Webster's trumped the IRC when it came to tax law.

Are you referring to the IRS?....

[thespaah]

Originally Posted by AndyC

What is a legit race?

Do you depend on income from the horse ownership activity for your livelihood?

Check out IRC section 183 and the regulations there under. The issue of business v. hobby has been litigated many times. Anybody considering horse ownership on less than a full scale basis would be wise to be well versed on the issue.

From irs.gov..section 183...
The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby:
Does the time and effort put into the activity indicate an intention to make a profit?
Do you depend on income from the activity?
If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
Have you changed methods of operation to improve profitability?
Do you have the knowledge needed to carry on the activity as a successful business?
Have you made a profit in similar activities in the past?
Does the activity make a profit in some years?
Do you expect to make a profit in the future from the appreciation of assets used in the activity?
An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses).
So,,,where does this state that the ownership of racing horses IS ALWAYS considered a HOBBY?......

[AndyC]

Originally Posted by thespaah

......So,,,where does this state that the ownership of racing horses IS ALWAYS considered a HOBBY?......

It doesn't and I certainly didn't say so. But where do people get the idea that just buying and racing a horse means you are running a business?

[AndyC]

Originally Posted by thespaah

Just a minute. If owning race horses is one's primary business from which they derive their income, then YES, it is eligible for tax write offs...It is not a hobby. It is their JOB....

No dispute there.

[AndyC]

Originally Posted by thespaah

That money has already been taxed many times over. Here in the states. governments simply legislated themselves another bite at the apple...BTW, in Canada, lottery winnings are tax free as well

How has the money already been taxed? So when I get a paycheck and go spend the money at a store the store shouldn't pay taxes because the money has already been taxed? Hooray for Canada.

[AndyC]

Originally Posted by thespaah

Are you referring to the IRS?....

IRC, aka the Internal Revenue Code.

[dilanesp]

Originally Posted by AndyC

How has the money already been taxed? So when I get a paycheck and go spend the money at a store the store shouldn't pay taxes because the money has already been taxed? Hooray for Canada.

Yeah, the notion that "double taxation" is some horrible thing that must be avoided is silly. All money gets taxed multiple times, usually after a transfer.

[ronsmac]

Originally Posted by dilanesp

Yeah, the notion that "double taxation" is some horrible thing that must be avoided is silly. All money gets taxed multiple times, usually after a transfer.

I favor quadruple taxation. That way we have to bet more to make up for our lost winnings. Problem solved.

[dilanesp]

Originally Posted by ronsmac

I favor quadruple taxation. That way we have to bet more to make up for our lost winnings. Problem solved.

As a policy matter, I favor pool taxation and NO income tax for winnings. I think that's both the fairest way to tax gamblers AND solves all the collection issues. (Indeed, that's how states tax their lotteries-- they take a takeout (which, obviously is too big, but you can still see the model) but the winners don't have to pay any state income tax on the winnings.)

I have never done the numbers, but I suspect that even a pretty darned small federal tax on pools (a percentage point or so) is going to bring in the same amount of money as they bring in now from all the income taxes on winnings. So that's just good policy and it would get rid of a ton of taxation headaches for players.

But it has nothing to do with whether it's "double taxation". The money is taxed when it is received by the racetrack, and taxed again when it is transferred to the winning player. That's similar to the way all taxation works-- taxation after a transfer.