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| Sport & Leisure |
Horse Sense
Reshma Memon Yaqub
12/01/2003
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Expenses, of course, are deductible for owners who can show that they race horses as a business. A post-9/11 economic stimulus package increased the rate of depreciation for racehorses from 10.7 percent to 37.5 percent in the first year. The IRS also allows you to deduct the first $100,000 of your equine investments from your total taxable income each year. Gains from horses sold after two years are treated as capital gains, which are taxed at a lower rate than standard income.
Because getting a horse up and running can be not only costly but also time-consuming, many owners enter the field through joint ownership, also known as syndication. The two best-known syndicates are Dogwood Stable (www.dogwoodstable.com) and Team Valor (www.teamvalor.com).
Commer runs his own syndicate, Contrarian Stables, through which he has syndicated 39 horses to a total of 22 investors. No two of those 39 horses are owned by the exact same group of investors. In his syndicate, investors must purchase at least one-tenth of at least five different horses. In the last two years, the least amount for which he has sold a one-tenth share is $4,000, and the most is $25,000. Some of the horses make money for their owners, and others lose it. "In any group of five horses," says Commer, "I tell people that if you get one good horse, three mediocre ones, and one bad one, then you are ahead of the game."
Schwartz never doubts that his horse investments have paid off, though he cannot pinpoint precisely how much. "This is a balance sheet business," he says, "not a profit and loss business."
And, anyway, his motive is not the money but the thrill. "There’s nothing in the world that can compare with watching your horse win a race and standing in the winner’s circle," Schwartz says. "To me a day at the races is absolutely the most enjoyable way to spend a day. It’s like going to a county fair."
One major perk of owning horses is the invention of names. Schwartz named Degenerate Jon after his son, Jonathan. "Even at 5 years old, my son loved going to the track," Schwartz recalls. "He was our little degenerate." Schwartz’s daughter lent her moniker to the more mildly named Stephanie Leigh. Both horses went on to run in major races, Degenerate Jon in the Kentucky Derby, a race that Schwartz still banks on winning someday. "Degenerate" Jonathan, all grown up now, owns three horses of his own—a certain sign that this family has no plans to quit horsing around.
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