Wicked Weasel

So has anyone tried to start their own "racing" team just to get the tax write-off.

Would it be legal to claim HPDEs as training and work done to the car as a write-off if I started a racing team. you could also write-off the trailer, tow truck, hotel rooms, dinners, etc etc etc...

seems like it would make sense even if the team lost money which of course it. I know that you can get a few years of a business losing money until the IRS says it is a hobby and not a business anymore.

Scooter70

If you do a search, you'll find that it's been discussed in here before. The general concensus is that it's not exactly "legit".

Wicked Weasel

well paying taxes is not exactly "fair"

thanks I figure there are rules to watch this stuff, but for every rule there is a loophole to be found...

Don Keefhardt

Major audit trigger.

Wicked Weasel

now I dont need that

AU N EGL

Your racing team needs or should be a completly seperate corporation. Wicked Weasel Motorsports Club Inc or LLC.

You can solisoit sponsorhip from other companies to pay you for advertsing THEIR product or sevice. You can NOT pay yourself. Wicked Weasel Widgets company paying Wicked Weasel Motorsports.

The idea of using your racing as 'advertisng' for your Widget company is possible, but talk to a good tax accountant or tax attorney. However, that may be like advertsing your Widgets on YOUR deliver trucks and taking an extra advertsing deduction.

i.e. very dark shade of gray in the black and white tax areana.

leadfoot4

And you wouldn't believe the tax code books the IRS drags out when you go through a "racing team" audit. You and your tax perparer have a couple of books the thickness of Hot Rod magazine, and they drag out 2 or 3 phone books worth of rules!!

I didn't have my racing set up as a seperate corporation, as suggested by AU N GEL, and they started tearing through my personal deductions....... It got really ugly!

Wicked Weasel

I would setup an LLC or S-corp without a doubt. I dont want anything tied to my personal accounts.

I was thinking that I could write off all my expenses and then see where I go. If I was good enough then of course I would get sponsors (which I would assume would be considered revenue), but if I never made it then at least I did something I liked.....

Maineiac

Need someone to drive a second car?....teammate?....



FWIW...I know someone who use to own a corp. and sponsored his own race team....wrote everything off to advertising expense.

StArrow68

My experience is very old, but hobby rules back 20+ years required a presumption that you could make a profit in 2 out of 5 years. That is you had a plan that would result in profits that could be considered as a sound basis for the initial spending. Without that presumption they could throw out the losses. I doubt the rules have gotten easier.
Randy

John Shiels

Good Luck ask a tax attorney and see if he doesn't

AU N EGL

Or you could just send $1500 a month to John so he car go race and YOU CAN deduct it

forhamilton

I am having this discussion with my accountant right now and this is very dicy. Essentially my company is sponsoring all equipment that can carry advertisement (i.e. trailer). A small percentage of the other may be allowable, but I must prove that it was in an effort to advertise or in some way gain business. Mixing hobbies with business will always trigger audits.

Anyone that learns any additional information, please post.

Wicked Weasel

I wonder how movie companies stay in business when they claim that every movie is a lose.

I figure I can put together a plan to show profits. Of course it is all dependant on my success on the track. After a few years I can jsut say I stink...

StArrow68

For the movie company it's not a hobby, the tax code presumes that rational people won't stay in a losing business forever.

In a hobby it gets judged after the fact as to what assumptions were used and if they were reasonable. I'll let you decide who wins when the IRS gets to make decisions in hindsight.

seege

There are many forms of advertising out there, some are more effective than others for sure. If you choose to advertise your business on your car(and charge yourself for it) it may not be the most cost effective advertising. Who is to say? Does the IRS disallow other advertising options? Mailers , TV, print, billboards, internet, flying banners,guys on the corner in costume with a sign, etc - just because you own the media yourself? Some of those media are worthless to certain companies and great for others. Advertising your co. on your car is a legitimate deduction according to my accountant - maybe not the most prudent but legitimate.

Remember, don't believe everything you read on the internet

Wicked Weasel

ok I vote for flat tax

gonzalezfj

What you say is true for the most part. I already have the corporation (active for 5 years and profitable) and have discussed promotion through racing at length with my tax attorney (my son is in the legal profession). It matters little whether or not your deductions are legitimate if the IRS decides to audit you.

The hassles and out-of-pocket expenses of an audit would quickly eat up any tax savings you may generate with the racing corp.

Bottom line: it is not worth the audit risk, at least for me. YMMV.

Frank

63Corvette

"My experience is very old, but hobby rules back 20+ years required a presumption that you could make a profit in 2 out of 5 years. That is you had a plan that would result in profits that could be considered as a sound basis for the initial spending. Without that presumption they could throw out the losses. I doubt the rules have gotten easier.
Randy"

I concur.
IF you should be so lucky as to win big (commercially) in your first year, and declare and pay taxes on those profits, THEN you would (in my opinion) have a sound basis for continuing to race (presumption of profit) for up to 5 additional years.
Prepare to be audited each of the years that you race......forever

Carl Johansson

My brothers apparently been getting away with it for a few years. He writes it off as a business expense - entertaining potential clients. He lets a few guys drive his car - a simple easy event - like bonneville speedtrials - and writes off the car expenses - and whatever travel and entry fees for any even with a client showing up. If no clients - he doesn't write off the entries and expenses!

Carl Johansson