For those attending the 2013 breeding stock sales, it is worth looking at a tax incentive that may apply to purchases this year. The Expense Provision allows the purchaser to expense (write-off) all or a portion of the purchase price of a horse or horses, including broodmare prospects. This incentive can apply to a single purchase provided the horse qualifies and is placed in service in 2013. Since, like most tax provisions, there are technicalities which must be met, a purchaser who wants to use this provision should consult with their tax advisor to make sure it applies to their situation. Below are some details.
A purchaser can deduct up to $500,000 of the cost of a horse or horses purchased in 2013, provided (1) the total of all purchases of horses and other depreciable business property does not exceed $2 million and (2) the horse is placed in service by the purchaser in 2013. If the purchase exceeds $2 million, the amount that can be expensed in 2013 is reduced one dollar for each dollar the amount of such purchases exceeds $2 million.
How does the purchaser put a broodmare in service? Read more here.