Type of Property--Race Horses

[Brian EA]

Client sold race horses. What is the property classification. Would they be considered 1245 property?

thanks
brian

[Koss]

Section 1245

The answer appears to be YES.

According to the instructions for Form 4797, Section 1245 property is:

property that is depreciable (or amortizable under section 185 (repealed), 197, or 1253(d)(2) or (3) (as in effect before the enactment of P.L. 103-66)) and is one of the following:
- Personal property.
- Elevators and escalators placed in service before 1987.
- Real property (other than property described under tangible real property below) subject to amortization or deductions under section 169, 179, 179A, 179B...
<snip>

Okay, let's stop here.

Horses are depreciable, and they are personal property, i.e., they are not real property.

So we're done. Note the period after the words "personal property." There do not appear to be any exceptions to this particular category.

Once, at a conference, I met a guy who worked at the IRS, in the editorial department, where they write and review the instructions for tax forms.

He told me that his primary responsibility was "validation of the relationships and dependencies of nested parenthetical references."

(Just kidding.)

[Brian EA]

Thanks Koss but horses can also be considered farm animals. Maybe i am reading too much into it.

brian

[Koss]

I certainly agree that horses can be defined as livestock.

Racehorses and livestock are defined differently for purposes of depreciation.

But either way, isn't it all personal property?

When is a horse not a horse?

When it's fully depreciated.

If it isn't Section 1245 property, then what is it?

This isn't my strongest area. Section 1250 is depreciable real property. Section 1244 is qualified small business stock. (Not livestock.)

What other categories are there?

[veritas]

When is a horse not a horse?

And no one can talk to a horse of course
That is, of course, unless the horse is the famous Mr. Ed.