A Horse, of Course with Don Blazer

Ever been kicked by a mule?

The IRS (Internal Revenue Service) is getting both hinds these days. And who isn't lovin' it?

The problem is the mule kick to the IRS isn't half as bad as what the IRS has already done, and undoubtedly will do to some horse owners. The pain of a mule kick makes you cautious for awhile, and a little more careful in the future. But, as long as there is a tax code the IRS is going to have the power to audit, the ability to penalize and the belief they can walk behind the mule without taking a fatal kick.

If you are a horse owner, then you ought to be in the horse business. It's the only way to play the game--by their rules. (Of course, if you only want a horse for the pure enjoyment, the costs are the costs and you should be willing to pay them.)

But any horseman with more than one pleasure horse needs to investigate the tax benefits available. Instead of considering horse ownership as a pleasurable past time, look upon it as a business pursuit. (You know you can make money with horses.) While the pleasure is always there, all that is necessary to have your alfalfa and gain too is the intent or expectation of making a profit.

Some of the prerequisites, of course, are that your horse operation be treated as a legitimate business. Enlisting professional help, keeping proper records and handling the books as in any other business are basic. Establishing plans, goals and budgets will help prove intent and profit motive.

The IRS has made it easy to meet the first requirement You only have to show a profit in any two of seven consecutive years to establish a profit motive. In some cases, even this requirement can be waived, provided you do have a legitimate business, profit intentions and the reasonsable possibility of attaining your goals. (The true key is that you produce some income. You must sell some horses, or you must win some events which result in prize money. I didn't say you had to sell your favorite horse, just that you had to sell some horses. Why not trade? While you are trading and training, you are learning and the extra dollars are a plus.) An important assistance offered to horsemen by the IRS is the useful life expectancy table for race horses, brood mares and stallions at stud. These guidelines are quite liberal, and with any luck at all, the odds are definitely in favor of the horseman. The guides were established after intensive study by industry experts and are accepted without question by the IRS. Because of the guidelines a person can often recover the full cost of horses through depreciation, and still have the profit-producing horse for many years.

You may not be interested in racing, but owning race horses outright or in partnerships certainly puts you in the horse business. Don't ignore the possibilities, even though your main interest might be Icelandic ponies. If you conduct yourhorse operation as a business, you'll gain many tax advantages simply from legitimate business expenses. The costs of books and horse publications, for example, are deductible as are other expenses for you own education. Trips, including meals and lodging qualify as business expenses as long as you show they improve the skills you need for your business. (No one ever stops learning about horses.)

The requirement is you mustbe able to show all business expenses were ordinary and necessary and directly connected with the operation of your business. That really isn't too hard to do.

The tax code allows for tax minimizing, in fact, it's encouraged. (That's why all the "fat hosses" keep the tax code in place.)

But tax evasion is illegal.

Be careful and don't be fooled by an scheme which suggests you can make money by losing money and thereby not pay taxes.

If you want to play, you got to pay.

On the other hand, if you want to be in business, and play the game as it was invented--for business, then let that mule kick the IRS right in the seat of the whole matter.

The IRS is going to be tending some bruises instead of running roughshod over horsemen--at least for the next couple of years. It's a good time to start a horse business.