New Jersey "Place of Business"

[equinecpa]

I am doing several returns for various horse racing partnerships. They are organized in NJ and the books and banking are maintained in NJ. Some partners are NJ residents, some are not.

I'm trying to do the NJ income allocation and am not sure if the business places of business outside of NJ can be considered "regular places of business". Their horses on the whole run outside of NJ. They are kept at various tracks in PA and NY. The partnership splits earnings with trainers as a trade off against horse expenses. Could the racetracks in PA and NY be considered regular places of business?

On the one return I'm doing currently all purse money was won outside of NJ - it seems fair to me that I shouldn't be allocating it to NJ source. Of course I'll need to see if it needs to be allocated to the various states where it was actually won.

So NJ preparers what do you think?

Thanks

Carolyn

[Snaggletooth]

Tough Question Equestrienne

Carolyn, I'm not going to attempt to answer this, but I'm hoping Nancy Parker from TTB will read the question and answer.

There may be a parallel between the horse and other athletes and sporting events. The comparison is not as ridiculous as it may sound, as Secretariat was chosen "Athlete of the Year" in 1973. In recent years, athletes would allocate their state income on the basis of games played in each state. Under this scenario, the allocation would occur irrespective of the outcome of the contest. Your horses would thus allocate earnings based on the occurences of venues in each state.

Another variation of this approach would be to allocate income only to those state in which winnings were registered. An allocation on dollars won would tax the owners in proportion to dollars won in different states, and allocate zero income on states where there were no winnings.

Regardless of the above, your states are not obligated to honor each others' rulings unless the states are signatories to the multistate tax compact. The compact defines broad issues, but does not address everything. The three states you mention, for example, are very greedy with respect to each other. NJ and NY are widely known for ignoring each others' court cases.

I realize you brought the question to the forum in hopes of getting an answer, and I haven't accomplished anything except to add other considerations to the problem. But I'm hoping this might trigger other knowledgeable people to respond.

[equinecpa]

Good food for thought...

I'm a former Canadian and remember learning how American hockey players had to watch the number of days spent in Canada to avoid deemed residency status.

I think it is reasonable to allocate based on a method that is logical and can be supported ie # of races won, earnings won or some similar basis.

It seems to me the IRS had a ruling that a trainer couldn't claim his lodging expenses at various tracks because though the trainer only spent several months out of each year at each track, these were his tax home. I should think what's good for the goose should be good for the gander!

NJ seems to be an awful state for various taxes...I can't believe the Part 100 tax-$150 per partner...seems ludicrous. Are there any loopholes out there for getting around that tax?

Good night it's late

Carolyn