This article summarizes the guidelines for horse owners contemplating such a charitable contribution.
Recipient
Be sure that the donee organization qualifies as an eligible charity under the Internal Revenue Code and that your horse will be used by the organization to further its exempt purpose. You can ask to see the “IRS Determination Letter” or look online for the listing of approved charities.

Determining Fair Market Value (FMV)
What is the price your horse could be donated for on the date of your charitable gift? You may want to consider the services of a professional equine appraiser.

FMV will be a function of several variables, including the horse's age, the number of years owned, how the horse has been trained and used, as well as the horse's personality and track record.

The appraisal should include a description of the horse, the dates of the appraisal and donation, the appraiser's name and qualifications, and the appraisal method used.

Potential Income Tax Deduction
Generally, you may deduct the FMV of the horse you are donating, though many caveats apply. The full FMV deduction is available when:

–The horse will be used by the donee charitable organization directly in regard to its stated charitable purpose.

–There is no financial consideration received in return.

–You have used the horse in business activities for the prior 24 months.

Limitations on the Income Tax Charitable Contribution Deduction
If the horse is not used in connection with the charity's purpose, the income tax deduction becomes the lesser of the FMV of the horse or the amount of your cost basis. A horse that you bred yourself or one that is fully depreciated would not give rise to any deduction in such a case.

This same limitation of the lesser of FMV or cost basis also applies to a horse that has been owned for less than 24 months.

Another situation of a reduced deduction arises when a donated horse that has appreciated in value but has been depreciated. In this scenario, the amount of the charitable deduction is reduced by the amount of depreciation that has been taken.

Further, if you donate a horse that has diminished in value, i.e. your cost basis is higher than the FMV, your charitable deduction would be limited to the FMV.

In such a case, you may be better off selling the horse to generate a tax loss, then donating the proceeds to the charity.

How to Report Your Donation on Your Tax Return
When your charitable deduction is more than $500, you will need to include Form 8283 with your tax return. This form asks for how and when you acquired the horse, your basis, the estimated FMV, and the method used to come up with the FMV.

If the charitable deduction to be taken is greater than $5,000, you will need to have your horse appraised at the time of the donation. This attached written appraisal needs to be contemporaneous and signed by the appraiser, along with the appraiser's qualifications and method(s) used to determine the valuation.

The Green Group
Our team here at the Green Group, with our many decades of equine experience, would be glad to walk you through the steps to make sure that you achieve the maximum charitable contribution deduction that you deserve.

The post Proven Strategies: Looking a Gift Horse in the Mouth appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

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The ERC will once again be managed by famed race-caller Tom Durkin. Training the current roster of runners for the 2022 season are Hall of Famer Mark Casse; two-time Hall of Fame nominee Christophe Clement; and four-time leading trainer in New York, Linda Rice. ERC team runners currently include stakes winner Proven Strategies (Sky Mesa), in addition to Community Adjusted (Summer Front) and Freedomofthepress (Mshawish), who is entered to run at Aqueduct Saturday, Apr. 16.

“AND WE'RE OFF!!!!!!! Once again, the Empire Racing Club is off and running for another new year of New York Thoroughbred racing,” said ERC Managing Partner Tom Durkin. “The Empire Racing Club makes possible to members the thrill of owning a racehorse and being part of the game with a behind the scenes experience. The Club will have a number of runners to follow this year. It's what we call 'action'. See you in the winner's circle!”

Similarly to last season, ERC members receive regular updates about their horses via conference call, email and social media. The Club will offer the opportunity to visit the backstretch for morning training and the paddock when the ERC horses run, and will host dedicated ERC events.

“The new season will continue to feature the ERC Educational ZOOM Series in addition to the popular Race Day Events at NYRA tracks,” said ERC Coordinator Christina Bossinakis. “New for this year, the ERC will craft initiatives to offer interested members the opportunity to dip their toe into various levels of ownership, including the claiming game. Whether the goal is to enjoy the social scene, take advantage of the educational aspects or to gain a stake in the game, there will be something for everyone.”

Spearheaded by the New York Thoroughbred Horsemen's Association (NYTHA) in 2019, the ERC is a non-profit organization designed to introduce new fans to racehorse ownership.

For more information, visit www.empireracingclubny.com

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Now a 4-year-old, Vanzzy heads into the one-mile grass race that serves as the feature on Monmouth Park's 12-race card off two solid efforts to start his 2021 campaign.

“He was a little unlucky in his first start of the year (a third-place finish at Pimlico on July 11),” said Pino. “He threw a shoe in the paddock and got a little too keyed up. After he broke he wanted to run off with the rider and never settled at all.

“But he ran well all things considered and then came back and won his second time out (at Delaware Park on July 31) despite some trouble.”

Pino said the son of Verrazano “is a stronger horse this year.”

He will have to be Saturday, despite the short field. Among the six entered for the turf are the Mark Casse-trained Proven Strategies, who comes off a strong third-place finish in the Grade 2 Connaught Cup at Woodbine on July 18, and the Chad Brown-trained Value Proposition, listed as the 4-5 morning line favorite. Value Proposition ships in from New York for the race, with Paco Lopez listed to ride.

“Mark Casse's horse has speed but Vanzzy should be forwardly placed,” said Pino. “Obviously, Chad Brown's horse off the numbers looks like the horse to beat in the race. But you've got to run against that kind every now and then.

“Vanzzy is definitely a more mature horse this year and a stronger horse. I know we're going to see some strong races out of him. I'm planning and hoping that happens.”

Vanzzy, owned by Smart Angle LLP, has generally held his own through his 14-race career, with five wins, a second and a third and career earnings of $280,364. He shows two wins and two thirds in seven turf tries, the most notable being at a mile and a sixteenth in the 2020 Jersey Derby last year.

Pino has also entered Bird King in the race, with the 4-year-old gelding looking to make his turf debut after 16 dirt races.

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Team runners currently include stakes winner stakes winner Proven Strategies (Sky Mesa), maiden turf filly Community Adjusted (Summer Front), and the team newcomer, unraced 2-year-old filly Boom Roasted (Practical Joke). Winner of Woodbine's Toronto Cup last season, Proven Strategies, campaigned by the Empire Racing Club and Leonard and Jonathan Green, is a 10-1 shot on the morning line for the $100,000 Elusive Quality S. at Belmont Park Saturday. Also running during Belmont's opening week, Community Adjusted finished fourth for Hall of Fame nominee Christophe Clement, who trains for the Empire Racing Club and Rob Masiello. Boom Roasted, also competing for the ERC and Masiello, is expected to join Tom Morley in New York in the coming week.

“I am really looking forward to seeing the members in person again–at the workouts, the races, and at our social gatherings where we can renew old acquaintances and share the experiences of up close involvement in racing,” said Durkin.

Spearheaded by the New York Thoroughbred Horsemen's Association (NYTHA) in 2019, the ERC is a non-profit organization designed to introduce new fans to racehorse ownership.

One benefit of ERC membership is the ERC Educational Series, regular Zoom meetings for members which have featured leading professionals from all aspects of the industry, including Todd Pletcher, Christophe Clement, Spendthrift's GM Ned Toffey, jockey Tyler Gaffalione, Linda Rice, Starlight and StarLadies' Jack and Laurie Wolf, TVG's Caton Bredar, DRF's Mike Welsch and David Grening, etc. Topics covered during the first two seasons of the ERC included breeding, sales, racing partnerships and syndicates, the claiming game, equine health and veterinary care, Thoroughbred retirement, and handicapping.

“I'm really excited to kick off the new year with our members,” said ERC Board member Rob Masiello. “We were able to adapt to the challenges that last year presented and create a series of virtual meetings with our members that included several leading owners, trainers, and bloodstock agents.”

ERC members receive regular updates about their horses via conference call, email and social media. Once fans are welcomed back to the track, the Club will offer the opportunity to visit the backstretch for morning training and the paddock when the ERC horses run, and will host dedicated ERC events.

For more information, visit www.empireracingclub.wildapricot.org.

The post Empire Racing Club Launches Third Season appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

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The same is true with maximizing your tax deductions and minimizing your taxes.

For those who think it is too late to save on your 2020 taxes, we are here to tell you, it is not!

With over 40 years’ experience saving our clients taxes along with our knowledge of the new tax laws, we are confident the following information will help you as you approach the 2020 home stretch and allow you to hit the wire a winner.

Current Tax Act and What it Means to The Horse Industry

The Current Tax Act contains favorable developments for depreciating and expensing yearlings, breeding stock, farm equipment and other property.

Bonus Depreciation: An increase in bonus depreciation allows a write-off to increase from 50% to 100%. Accordingly, you are now permitted to fully expense purchases in the first year for yearlings, breeding stock and farm equipment. Used property can now qualify also. A few weeks still remain for 2020 asset additions with the potential benefit of a full tax write-off.

IRC&179 Deduction: The maximum amount that may be expensed has been increased from $500,000 to $1 million. The phase-out threshold has been increased from $2 million to $2.5 million.

Farm Equipment: The useful life has been reduced from seven years to five years and the 200% declining balance method can now be used.

Racehorses: Certain Thoroughbreds can still be depreciated as three-year property.

Even if business equipment (or horses) is purchased before year-end, they still qualify for these tax benefits.

2020 Year-End Tax Planning Strategies

Due to the transition of administration in our nation’s capital and the uncertainty of whether or not proposed tax law changes will be forthcoming, year-end tax planning for 2020 is more important than ever.

Steps Available for Individual Taxpayers

1. Capital Gains: President-elect Biden is proposing an increase from 20% to 39.6% on capital gains for taxpayers with income above $1 million. Accordingly, if you are contemplating a sale of horses or real estate, you should consider accelerating the transaction into 2020 rather than waiting until 2021.

Even for taxpayers with income below the $1-million threshold, if you have realized capital gains in 2020, along with unrealized losses, you might want to trigger those losses before year-end to offset your gains, thereby reducing your tax liability.

On the flip side, if you have realized losses, consider taking some gains, as the deduction for capital losses is limited to $3,000 in any given year.

2. Retirement Plan Alerts: Several relief measures are included in recent tax legislation to help individuals who are approaching retirement or facing financial concerns.

First, required minimum distributions are suspended for Year 2020. As a result, if you do not have a financial need to take a distribution in 2020, you do not need to do so. Leave the money in the Pension Plan and continue to have it accumulate value, tax free.

Second, plan participants who turn 70 1/2 in 2020 or later do not need to take required distributions until the year in which they turn 72.

Third, you are now permitted to contribute to a traditional IRA after age 70 1/2 as long as you have earned income.

Fourth, the 10% early withdrawal penalty for distributions of up to $100,000 from workplace retirement plans will be waived for individuals who either become ill or lose their employment. These distributions can be spread over three years, and individuals can recontribute all, or a portion, to avoid a penalty.

Fifth, contributions to a Keogh plan or a one-person 401(k) plan can be significant and save you substantial 2020 tax dollars if set up before Dec. 31, 2020.

A SEP-IRA is another flexible alternative. A SEP can be set up before the filling date of your 2020 tax return, yet still provide you with a 2020 deduction.

3. Avoid the Underpayment of Estimated Tax Penalty: If you have not prepared a 2020 income tax projection, you should have your advisor do so. If your 2020 projection shows a balance due, request that a disproportionate amount of withholding be taken from your December paychecks, year-end bonus, or retirement plan distribution, rather than paying a comparable significant amount with a fourth-quarter estimated tax voucher.

This withholding approach is more favorable than writing a check because taxes that are withheld in December are deemed to be “thrown back” and treated as evenly spread through the calendar year. This enables you to catch up on any shortfall and still avoid a penalty for the first three quarters.

4. Net Operating Losses (NOLs): Recent tax legislation temporarily reverses the rules enacted in 2017 which preclude the carryback of NOLs. Individuals with NOLs arising in 2018, 2019 and 2020 can now carry back their NOLs five years.

Of great importance, business losses, which had been capped at $250,000 for single taxpayers and $500,00 for joint returns, can be deducted without limitation through 2020!

5. Maximize the Pass-Through Business Income Deduction: This tax-saving deduction allows certain taxpayers to deduct 20% of their qualified business income. To maximize the deduction, you should take action steps to qualify your taxable income so it is below this new provision’s phase-out thresholds.

Steps Available for Business Taxpayers

1. Tax Treatment of Losses: Corporations can once again carry back NOLs, at least for losses arising in 2018 through 2020. Tax rule changes in December of 2017 had put a stop to this practice. Recent tax legislation reinstates this benefit and the carryback period is five years. Another temporary change is that corporations can now use NOLs to offset their entire taxable income through the 2020 tax year. The 2017 Tax Act’s 80% limitation has been temporarily removed.
2. Maximize Available Depreciation: Businesses should consider making expenditures that qualify for 100% first-year bonus depreciation. Generally, both new and used depreciable assets are eligible. The full first-year write-off is allowed even if the asset is purchased late in the year and even if the deduction gives rise to a taxable loss.

Also, make sure you are taking bonus depreciation on all assets that are eligible. Many times assets are missed as to leasehold improvements on horses purchased in overseas sales or horses put into training but not yet raced.

An alternative is Section 179 depreciation, where for 2020 the expense limit has been raised to $1,040,000 if the investment purchases do not exceed $2,590,000. Keep in mind that Section 179 expensing cannot give rise to a loss.

3. Qualified Business Income (QBI) Deduction: Certain business owners may be entitled to a deduction of up to 20% of their qualified business income. You should take whatever steps are possible to keep your taxable income below the phase-out thresholds. The rules are complex, so contact your tax advisor so they can help you maximize the use of the QBI deduction.

Possible Tax Law Changes Proposed by the Biden Administration

The best way to sum up President-elect Joe Biden’s tax plan would be to say he wants to raise taxes on high-income households and corporations.

• Increase the corporate tax rate: The existing tax plan lowered the corporate rate from 35% to 21%. While Biden’s camp generally agrees 35% was too high, their proposal is to raise it to 28%.
• Increase taxes on high earners: Biden would restore the 39.6% top marginal tax rate that was in effect prior to the 2018 tax year.
• Phase out the pass-through deduction: Biden would phase out the 20% Qualified Business Income (QBI) deduction for taxpayers earning $400,000 or more.
• Increase capital gains tax on high earners: Currently capital gains enjoy lower tax rates than ordinary income, but Biden’s proposal would change this for taxpayers earning more than $1 million.
• Increase Social Security taxes: Biden would increase revenue to Social Security by imposing the 12.4% payroll tax (half of which is paid by the taxpayer) on all income above $400,000 in addition to the current structure of the tax.
• Changes in estate planning: This portion of the proposed plan is less straightforward. On the one hand, you have the estate tax exemption of $11.58 million being reduced by 50%. On the other hand, there is less clarity regarding important items such as step-up in basis, business asset exemptions, capital gains, etc.

Clearly there will be changes, adjustments and alterations during the negotiation period prior to any changes being implemented. Also note that it is highly unlikely that any new laws will be made retroactively to 2020. Our best advice is to keep an open line of communication with your tax and financial advisors prior to making any updates to your estate planning.

The Green Group welcomes the opportunity to discuss your 2020 year-end tax-saving strategies with you by phone at 732.634.5100. In the meantime, stay well.

The post Proven Strategies: End-of-Year Tax-Saving Tips appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

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The formal definition of an independent contractor is a person or entity contracted to perform work for, or provide services to another entity as a nonemployee (meaning that the employee is “at will” and not eligible for an employer’s health or retirement benefits). The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to self-employment tax.

Self-employed professions such as jockeys, jockey agents, confirmation videographers, bloodstock agents, blacksmiths, veterinarians, exercise riders, equine chiropractors, bid spotters/auctioneers, sales short listers, etc. are all possible examples of horse-related independent contractors.

Prior to the enactment of the new tax act in 2017, if you operated your business as a sole proprietor, you could still take advantage of many of the tax deductions that you incurred. With the adoption of the new Tax Act came a limitation on the deductibility of state income taxes, real estate taxes and the elimination of all personal business-related expenses.

Expenses that Could Become Tax Deductible

There are a number of expenses, if you are in the above categories, that can be tax deductible such as the following:

a. Training–training expense whether for racing, shows or for sales become deductible
b. Professional fees
c. Veterinary fees
d. Vanning and other transportation expenses–if you own racehorses and/or consign horses at sales, you should be sure to include all transportation expenses
e. Work clothing–all of you involved in the training side of the business, including jockeys, should deduct any garments/outfits that are primarily worn while riding, breaking or training horses
f. Barn and stable supplies
g. Feed and shavings; as well as removal expenses
h. Books, magazines, online subscriptions and/or sales analysis reference guides
i. Breeding fees
j. Broodmare leases
k. Meals for employees who were taking care of the horses
l. Equine therapy
m. Depreciation (including bonus depreciation)

In order to ensure that you are maximizing the above deductions, be sure to communicate with your tax provider. Have your accountant confirm your status as an independent contractor and indicate that status on your tax returns. If you want additional legal protection, you may want to either form an LLC which provides you with additional liability protection or a Subchapter S Corporation.

Important Additional Fact

The deductions listed above are, in most cases, equally tax deductible for partners in an LLC or shareholders in Sub Chapter S corporations.

Increasing Your Retirement Contributions

Most independent contractors can make retirement contributions into an IRA. The annual contribution limit for 2020 is $6,000 or $7,000 if you are age 50 or older. If you have a Roth IRA, the 2020 contributions may also be limited based on your filing status and income.

However, there is a plan that will allow you to greatly increase your retirement contributions and simultaneously reduce your taxable income. A Solo 401(k), also known as a Self-Employed 401(k) or Individual 401(k) is a 401(k) qualified retirement plan that was designed specifically for employers with no full-time employees. The Solo 401(k) is unique because it only covers the business owner(s) and their spouse(s), thus, not subjecting the 401(k) plan to the complex ERISA (Employee Retirement Income Security Act of 1974) Rules which sets minimum standards for employer pension plans with non-owner employees. Independent contractors who qualify for the Solo 401(k) can receive the same tax benefits as in a general 401(k) plan but without the employer being subject to the complexities of ERISA.

The contribution limits for the Solo 401(k) are the same as a standard 401(k). They are broken down into a profit-sharing contribution, which comes from the employer and a salary deferral contribution which comes from the employee. However, due to the fact that in a Solo 401(k) the plan holder is acting both as employer and employee, the actual percentages assume a more meaningful role. If the plan holder is filing as a Sole Proprietor or Single Member LLC, which is true in most cases, then the limit is capped at 20% of the self-employed income, plus $19,000 for 2020. IRC Section 401(a)(3) states that the amount of employer contributions is limited to 25% of the entity’s income subject to self-employment tax. Schedule C sole proprietors must do an added calculation starting with earned income to determine their maximum contribution which, in effect, brings the maximum 25% of compensation limit down to 20% of earned income.

In both cases, the IRS has declared an upper limit for total employer and employee contributions to a plan, the IRS Section 415(c) limit which may not be exceeded. As of 2020, this upper limit is $56,000 for those under 50 and $62,000 for those 50 and older.

Other contribution limits may apply so we highly recommend that you discuss your options with your tax professional and/or investment advisor.

There may be alternative retirement plans such as SEP which you may be eligible for.

Bottom Line

The Thoroughbred horse business is like no other business when it comes to its complexity, challenges and strategies.

The same can be said as to how to maximize your tax deductions.

If you have any questions, please contact Len Green lgreen@greenco.com or Jim Benkoil jbenkoil@greenco.com at The Green Group or call us at 732.634.5100.

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The sixth running of the Pennine Ridge, contested at a mile on Belmont's Widener turf course, was carded as the second of six graded stakes on the loaded 12-race Belmont Stakes day program.

A son of Declaration of War, Decorated Invader showed a good deal of promise as a 2-year-old, including a Grade 1 win in the Summer Stakes at Woodbine and a fast-closing fourth-place finish in the Grade 1 Breeders' Cup Juvenile Turf to close out the year, but took noticeable steps forward as a sophomore. The bay colt came from far back to win the Cutler Bay by 1 ¼ lengths in his 2020 debut in May at Gulfstream Park and then showed a completely new dimension in the Pennine Ridge.

Breaking from the rail with Joel Rosario aboard, Decorated Invader put himself just off the early pace set by Proven Strategies. As the pacesetter ambled along through leisurely splits of 23.86 seconds for the opening quarter-mile, 47.50 for the half, and three-quarters 1:10.61 for three-quarters over firm turf, Decorated Invader tracked him intently in third while covered.

Proven Strategies angled out a bit around the far turn, allowing Rosario and Decorated Invader to quickly seize the opportunity, surging through the vacated inside path and vying for the lead as the field turned for home. The pair soon wrested control away from the frontrunner, and from there they opened up decisively, bounding down the stretch to complete the distance in a snappy 1:33.66.

“He's very classy,” Rosario said. “The pace was OK, but not too fast. He was there for me and so relaxed, so I just let him be there [closer up] because it looked like there was no pace up front. I made a move before the turn and I saw the horse inside [Proven Strategies] come off the rail a little bit, go in and out, and I wasn't sure what he was doing. I let him go inside and started working from there.”

Decorated Invader, owned in partnership by West Point Thoroughbreds, William Freeman, William Sandbrook and Cheryl Manning, bumped his bankroll to $370,535 with the victory. As the odds-on favorite, he returned $3.20 on a $2 win wager.

Clement was content to bask in the victory and marvel at his talented 3-year-old.

“I've always liked him since Day 1 and I think he's been a tremendous horse since the beginning,” said Clement. “He's been a top-class horse even last year. He was very unlucky in the Breeders' Cup. He won a Grade 1 in Canada. He won at Gulfstream this year. He won one today and I think he's good enough to do a mile, a mile and a quarter. I could be wrong, but I think he'll stay.”

Proven Strategies held well for second, finishing 1 ¾ lengths in front of third-place finisher Mr. Kringle, who closed from the back of the compact field to nab blacktype. Vanzzy, Famished, and Venezuelan Hug completed the order of finish. Maroon Maniac was scratched.

Saturday's stakes action at Belmont Park will culminate with the 152nd running of the Grade 1, $1 million Belmont Stakes in Race 10 at 5:42 p.m. Eastern. The American Classic, contested as the first leg of the Triple Crown this year, will see a 10-horse field led by morning-line favorite Tiz the Law looking to become the first New York-bred to win the Belmont since 1882. NBC will have live coverage starting at 2:45 p.m.

The post Decorated Invader Shows New Dimension Winning Pennine Ridge appeared first on Horse Racing News | Paulick Report.

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