Paul Husband has recently republished his popular article "Equine Leasing Transactions", in which he explains why leasing has become an attractive option to outright ownership for many breeding operations. The article outlines the potential cost savings and income producing advantages for the lessee and lessor, and explains key terms to be included in both stallion and mare leasing contracts. Will the income from stud fees be split between both parties and at what percentage? Will both parties retain breeding rights to the stallion? Who will pay for the insurance and who is entitled to collect in the event of a claim? Who will pay overhead, board and veterinary costs? How will registration applications and required reports be handled? In the case of a mare lease, who will be entitled to the foal(s)? Will the mare be stalled or pasture boarded? What stallion will she be bred to?
Paul goes on to give several case scenarios focusing on options and valuable recommendations regarding specific agreements for each. Tax benefits in regard to savings and deferrals are also discussed.
In these times of rising costs, it's more important than ever to make sound business decisions for your breeding operation. Find out if a leasing might be a viable option to help your equine operation reach its goals of increased profitability and success.
One of the ongoing problems in the evaluation of so-called "hobby loss" horse business before the IRS is whether or not the appreciated value of ranch or farmland counts as an asset of the horse business.
The Treasury Regulations provide that appreciated assets of a horse business including ranch or farm land are to be taken into account in evaluating the profitability of the horse business for purposes of determining whether or not the horse business is motivated primarily for profit; that is, whether or not a horse business owner can deduct his or her losses against other income. However, Tax Court cases which have applied this rule have done so inconsistently over the years.
Paul Husband's latest article focuses on land as an asset in a "hobby loss" case, and outlines examples of how courts have interpreted the code.
Paul Husband is pleased to present a free webinar for all horse owners and equine business professionals on Monday, March 19th at 5:30 p.m. PST / 8:30 p.m. EST.
Hosted by Equestrian Professional, the webinar entitled: “Pros and Cons - How the New 2018 USA Tax Laws Could Affect Your Horse Business” is a must to find out whether the new tax law will be good or bad for your horse operation. The new tax law – the Tax Cuts and Jobs Act (TCJA) was signed late in 2017 and is now in effect. Yet, most are not informed about how it will affect their business and personal taxes.
As stated by Equestrian Professional, “Mr. Husband's expertise in both equine business and tax matters makes him the ideal speaker for this event.”
Hundreds have already registered, and space is filling quickly. To reserve your spot, visit www.equestrianprofessional.com and click “Free Resources” or access the direct link at http://www.equestrianprofessional.com/public/Free-Webinar-Pros-and-Cons-How-the-New-USA-Tax-Law-Could-Affect-Your-Horse-Business.cfm
Paul Husband of Husband Law provides business and litigation services in state and federal courts, including the U.S. Tax Court, as well as tax and business planning for both for-profit and non-profit organizations. He has raised, shown and raced Arabian horses for most of his life, served for 20 years as an American Horse Shows Association Judge, has published numerous tax and equine law articles, reports and publications and is a sought-after public speaker at local and national events. He has been a member of the Board of Advisors and Contributors to The American Horse Council Tax Bulletin, is a member of the Graded Stakes Committee of the Arabian Jockey Club and is Vice President and a Director of the American College of Equine Attorneys.
To schedule Mr. Husband for a future speaking event, or to inquire about his tax and legal services, contact: Ph: (818) 955-8585, or visit the Contact Page,
Husband Law honors Willis Pyle, a respected friend and one of the greatest animators of all time. Willis, whose animated work is found in feature films such as Disney's Pinocchio, Bambi and Fantasia; and great UPA shorts such as Gerald McBoing-Boing, Robin Hoodlum, Punchy de Leon, The Magic Fluke and Mr. Magoo. Willis passed away in June at the age of 101. After long tours of duty with Disney and UPA he enjoyed a successful career, working on various projects including A Family Circus Christmas, This is America Charlie Brown and other Charlie Brown specials.
Paul Husband explains, "I was introduced to Willis years ago by Howell & Margo Wallace and Jim & Linda Dykeman. I had the pleasure of bringing him as my guest to ASIFA-Hollywood's Annie Awards several years ago when it was held at the Alex Theater in Glendale, where he enjoyed socializing with many of his old friends from the entertainment business.
Willis was a legendary talent and a great man of outstanding character who will be missed but never forgotten.
Recently, The Treasury Inspector General For Tax Administration (TIGTA) reviewed methods used by the IRS to identify businesses that may not be operating for profit, and recommended steps be taken to maximize the use of all relevant and available taxpayer information to better identify hobby losses. This is expected to pose a significant issue for some horse businesses.
The below is quoted from Highlights of Reference Number: 2016-30-031 to the Internal Revenue Service Commissioner for the Small Business/Self-Employed Division.
The Treasury Inspector General For Tax Administration (TIGTA)'s review of a statistically valid sample of 100 returns determined that 88 percent showed an indication that Schedule C businesses were not engaged in for profit. TIGTA estimates that 7,511 returns in the total sample population of taxpayers may have inappropriately used hobby loss expenses to reduce taxes by as much as $70.9 million for Tax Year 2013.
TIGTA recommended that the IRS: 1) make use of SB/SE Division research capabilities to identify high-income individual returns with multiyear Schedule C losses and other factors that indicate the taxpayer may not have a profit or capital gain motive for the activity and 2) emphasize the importance of required filing checks in the preliminary determination of whether to pursue a hobby loss issue and provide tools to assist examiners in documenting their conclusion. In response to the report, IRS management agreed with the recommendations and plans to take corrective actions.
READ THE FULL REPORT
Photo Copyright: vikarus / 123RF Stock Photo
Forbes.com published an article recently, stating that scammers posing as Internal Revenue Service (IRS) agents have managed to bilk tens of millions of dollars from unsuspecting taxpayers. The scammers inform the residents that some personal information such as a social security number or personal financial information needs to be verified in order for their tax returns to be processed. “Don’t be fooled,” says IRS Commissioner John Koskinen. “The IRS won’t be calling you out of the blue asking you to verify your personal tax information or aggressively threatening you to make an immediate payment.”
READ THE FULL ARTICLE
On May 10th, 2016, Paul Husband, along with co-presenter Robert Misey, presented “Tax Issues in the Equine Industries”. This practical two-hour online seminar hosted by CCH focused on key domestic and international tax concepts and issues in the equine industry.
A sampling of topics covered in this program include: Section 183 “Hobby Loss” challenges; Section 469 Passive Activity Losses; Depreciation; Section 179 Expensing of race horses and show horses; How to minimize your tax on equine activities abroad; and taxation on gains of sales of U.S. horse farms.
All professionals in public practice and in the equine industry will benefit from this helpful seminar, including business tax and finance executives, directors, managers and staff; CPAs; enrolled agents; tax preparers and staff; accountants, attorneys and other financial advisors who work with and advise clients in the equine industries that have domestic or international tax issues.
CCH, a Wolters Kluwer business, has been publishing materials on U.S. tax law and tax compliance since the inception of the modern U.S. federal income tax in 1913. Today, they are a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency.
The inaugural Equine Industry Symposium debuted in March, in Norco, CA. Hosted by Liza Rogers of Rancho Santiago, the symposium featured presentations by industry leaders from across the country covering a variety of topics on marketing, insurance, event management and other key business information. As featured in the May 2015 issue of California Riding Magazine, Paul Husband was on hand to discuss best practices regarding the topic of employees vs. independent contractors for horse businesses. "One key distinction, is that an employer can tell an employee how to do their job, whereas an independent contractor is typically responsible for delivering an agreed upon finished product," says Paul. He also stressed the importance of always keeping detailed records as the best protection in an audit. Another area noted for careful consideration is the management of non-cash deductions. "For example", Paul continues, "In order to receive a charitable contribution deduction for a horse's fair market value, when donating a horse, the recipient must be a 501c3 that will use the horse in its charitable purposes, and getting a written statement from the recipient reflecting that intent is extremely important; as well as meeting the other reporting requirements, which escalate with the value of the horse."
To receive information on the 2016 Equine Industry Symposium, visit: www.firsttimeevents.com
A recent, major tax court victory was won by attorney Paul Husband in a case that extended the prior limits for length and amounts of losses recognized as deductible as business losses in a profit motivated horse business, setting a valuable new precedent for horse owners!
The case involved the largest and longest losses of any published Section 183 “hobby loss” case, in which the horse owner won for an Arabian show horse operation operating as an S Corporation, which reported losses over 19 years.
Tax Court Judge Mark Holmes meticulously analyzed the nine regulatory factors, finding seven favorable to the taxpayers and two “neutral”, although Judge Holmes correctly pointed out that the test is not a numeric one, but a test of weighing all of the facts and circumstances.
The books and records (using “QuickBooks”) were found adequate to allow the taxpayers’ assessment of the operation’s economic performance and to identify strategies for reducing costs. The horse owners also made important modifications to their business operation, most notably selling their Florida farm and moving the entire operation to California where business conditions were better overall. They had also changed their operations to sell more horses for export to foreign markets.
The Court also found that where investment in a horse operation is substantial compared with a taxpayer’s other income, such a major investment may indicate profit motive. As to the personal pleasure element, the Court said that attendance at horse shows was to be expected from showhorse owners.
Two of most important findings of the Court were: first, cited with approval the precedent of Helmick v. Comm., T.C. Memo. 2009220, that a taxpayer needn't intend to recover all past losses, but must only show that they intended to eventually recoup losses sustained in “intervening years…between the current year and the hoped for profitable future.” In other words, only prospectively. Second, the Court reaffirmed the key concept that it would not substitute the Court’s business judgment for that of the taxpayers even though it may have considered some aspects of the taxpayers’ business judgment to be unwise.
All in all it was a major victory, especially for showhorse owners!
A complete copy of the opinion of U.S. Tax Court Judge Mark V. Holmes can be found at: http://www.ustaxcourt.gov/InOpHistoric/metzmemo.holmes.TCM.WPD.pdf
This site is dedicated to providing cutting-edge legal and business news to help you manage a more efficient, safe and profitable business. We also invite you to SUBSCRIBE to receive our free eBook "Straight Talk for Horse Business Owners." Stay Tuned - there's much more coming your way!