Racing Business

[RLymanC]

Husband and wife in racing business.

Building a car for the wife from scratch. Depreciate???

[jainen]

in the racing business

>>Building a car for the wife from scratch. Depreciate???<<

If they were really in the racing business they would already know the answer to this question. But they aren't really in the racing business, because there is no such thing as the racing business. A husband and wife building a race car from scratch couldn't possibly have any realistic expectation of profit within the life of that car.

[veritas]

Here is a formula to use

for future reference:

Racing + Business = black hole

[Black Bart]

Race Car

To RLymanC: Yes; depreciate.

To jainen: I demand an apology in advance to whichever racer you intend to insult.

[RLymanC]

Race Business

Thanks BB...

Jainen,,,,,,,you have a lot to learn,,,,being brash is not one of them,,,,you have learned that VERY well.

[Black Bart]

Brash...hmmm,

Isn't that something like being bash...ful? No..no..that wouldn't fit. Well anyway, don't be too hard on the boy -- he's havin' to hold himself in check with me and I just said I'd do it (depreciate) and that doesn't necessarily make me right. Actually, he's right about the odds of making money -- you'd probably stand a better chance of winning the Irish Sweepstakes that clearing cash in that racket.

Still, here's another tidbit from today's ASPA newsletter:

Case: James Castagnetta filed a Schedule C with his tax return saying he engaged in the business of wagering. He reported $52K of wagering income from which he deducted losing wages and other business expenses that reduced his net wagering income to $234.

IRS position: T/p earned his living as a truck driver and his gambling didn't have a profit motive and wasn't a business. Thus, he couldn't file Schedule C and the full $52K increased his AGI and expenses were only deductible as misc. itemized deductions -- 2% limit, blah, blah, blah.

Court position: He worked 40 hours a week on horse race analysis while driving a truck only part-time, creating detailed computerized data on horses, consulted regularly with racing pros, kept extensive business-like records, and actually had a small profit. All of this indicated that the did have a profit motive, so his gambling qualifies as a business and qualifies for full business deductions.

James Castagnetta, TC Summary Opinion 2006 24.

So anyway, jc, whaddaya think? Does the fact that he tries harder have any bearing on the usual client or is this just a fluke TC opinion?

[jainen]

something more

>>Jainen,,,,,,,you have a lot to learn,,,,being brash is not one of them,,,,you have learned that VERY well.<<

Wasn't my answer helpful? I made my position perfectly clear and gave you the reason why I felt that way. Now, you might very well entertain a different opinion on the tax law, but I hope that is based on something more than personalities.

[veritas]

Like Ricky Bobby always says

"Shake and Bake!"

[RLymanC]

Race Business

>>A husband and wife building a race car from scratch couldn't possibly have any realistic expectation of profit within the life of that car.<<

Well Jainen....there are many Nascar mechanics shakin their heads at that statement.

Quite a few top fuel drag racers also.

You statement goes back to my origianl question. The life of a race car, along with engines is very short. It's useful life has nothing to do with the cars ability to make money, but it does have a bearing on wheather to depreciate or expense.

[veritas]

I am going to take a stab at it

The race car is 7 year property falls under entertainment class of property.

This is aside from the fact the chance of making any money is about the same as becoming an NBA star.

"I'm going fast again"

Ricky Bobby

[jainen]

shakin their heads

>>there are many Nascar mechanics shakin their heads at that statement<<

And a few friends & family noddin their heads.

>>useful life has nothing to do with the cars ability to make money<<

Well, we can certainly agree on that point!

>> but it does have a bearing on whether to depreciate or expense<<

Useful life is not a consideration in MACRS, which specifies class life. If you are suggesting that race cars are just consumable supplies like a big toner cartridge or something, then we can also agree about the mechanics shakin their heads.

[S T]

Don't have a T/p for race cars

So this post is interesting!

I don't have a client that is involved in racing NASCAR.

But curious as to how you would handle. Seems like a LOT of expense, with a very limited amount of $$ income. Aren't there sponsors???

Sandy

[veritas]

Wwrbd?

What would Ricky Bobby do?


"If my MTV career doesn't work out, I was thinking I'd buy a gun and become a crack dealer. I wouldn't be, like, a mean crack dealer... a nice one. I'd just be like 'Hey guys, what's up? Want some crack?'"

[geekgirldany]

Depreciate the car. Apply the hobby loss rules to it. 3 out of 5 years.

It is pretty hard for them to pull a profit. I can tell you from experience that when they do start to pull a profit... they don't like it much. The first few years they will go through parts like (as Jainen put it) toner during tax season. Engines are purchased which are a huge expense. Eventually they will get sponsors. Hopefully. Myself I don't see how someone could continue pouring money into something like that.

A Few articles I pulled:

IHRA Article

http://www.racecarbook.com/articles/taxtime.shtml

Menard Racing Audit

http://www.jsonline.com/story/index.aspx?id=258105

[veritas]

The ones I have to wonder about

are the Monster Truck people. It's got to be a neurological disorder.