Pullers and IRS February 24, 2023 05:16AM
Is sponsorship treated as income?

What about when the puller owns the sponsor? For example, Jim owns Jim's Farm. He sponsors his tractor with Jim's Farms painted on both tractor and hauler. How does this situation work?

One general question - Are there any common tax mistakes newer pullers tend to make that costs them tax $, and could be avoided by setting up their pulling operation differently?



Edited 1 time(s). Last edit at 02/24/2023 05:17AM by The Original Michael.

Re: Pullers and IRS February 24, 2023 10:35AM
Get you a good CPA and they will answer these questions. Everyone's situation is different.

Re: Pullers and IRS February 24, 2023 11:58AM
IRS dont know the 3000 horse 1066 is not your knew plow tractor that you bought to farm with that ended up being a piece of junk you bought that eat a few turbos and crankshafts over the summer and needed a custom set of gears installed to pull the corn planter the correct speed so the correct amount of kernels per acre are dropped AND the wide floatation tires with know tread are a must for LESS soil compaction

Re: Pullers and IRS February 25, 2023 02:32PM
Quote
Lewis Conner
IRS dont know the 3000 horse 1066 is not your knew plow tractor that you bought to farm with that ended up being a piece of junk you bought that eat a few turbos and crankshafts over the summer and needed a custom set of gears installed to pull the corn planter the correct speed so the correct amount of kernels per acre are dropped AND the wide floatation tires with know tread are a must for LESS soil compaction

I agree with that until you get audited by the IRS. Now with that said, anyone that gets audited by the IRS needs to tell the IRS agent that audits you that the IRS works for ME because I am a taxpayer. The IRS has bigger fish to fry than a tractor puller.

Re: Pullers and IRS February 25, 2023 11:56PM
Quote
Supertiquer

The IRS has bigger fish to fry than a tractor puller.

Correct. If you hear any politician bashing the IRS and saying that they are coming after your money, just remember the above quote.

Billionaires and corporations pay politicians (and the ass kissing media) lots of money in order to get the rest of us to argue amongst ourselves. One the easiest topics is the IRS. There's nothing funnier to a billionaire than to say some jackass who doesn't have a pot to piss in complaining about the IRS!

Re: Pullers and IRS February 25, 2023 09:42PM
My accountant says," If you compete for money, it is deductible, if you compete for trophies, it's not."

Re: Pullers and IRS February 26, 2023 12:04AM
I hate the tax system and don’t blame anyone for taking advantage if you’re able, but you should be allowed to write off a puller haha. Bring on a flat tax already.

Re: Pullers and IRS February 26, 2023 08:55AM
Depends how you set things up. I'd guess most competitors at a higher level set up their pulling operations as a business for accounting purposes, even if just a sole proprietorship. Now to be able to deduct expenses a business needs to make money at some point, or at least show a viable business plan to do so. In pulling, as with most motorsports these days, no one will be profitable on prize money alone even if you win every time. So if I spend $100k on a season of pulling and win $50k, and don't show any other income to the pulling operation, after a few years of showing that $50k loss the IRS is going to start into my business and realize that I am just writing off expenses for a hobby that has no prospects of becoming an actual business. Obviously that's a no-go

Now if I get an actual cash money sponsorship that makes up the loss, that changes things. Say Lucas Oil gives me a $75k sponsorship deal, now my income is $50k winnings plus $75k sponsorship and my expenses are still $100k, now that's an actual money making business so the expenses are a legit write-off.

Probably a more common situation is as you say- a competitor has some other business interests that actually make money and support the pulling. So you become your own sponsor- your profitable business pays your unprofitable (pulling) business whatever it needs to break even or turn a small profit as an advertising expense. Same as the above scenario except now the sponsor is yourself instead of Lucas. Does it make business sense for, say, a grain farm which does no retail business and sells a commodity wholesale to "advertise" on a pulling vehicle that may not even compete in their area? Of course not. But the IRS isn't generally in the business of determining whether you are making good business decisions. As long as the sponsorship doesn't make the business doing the sponsoring lose money on a regular basis, you can do what you want.

So if you set some things up right, as long as you have enough money coming in from SOMEWHERE to cover your pulling habit (and if you don't, you've got bigger problems than the IRS) you can probably arrange it to make motorsports expenses a legitimate business write-off.

Re: Pullers and IRS February 26, 2023 01:40PM
Over the many years, I have received lots of farm business checks to pay for a pulling photo order. Then, always interesting to see on the next (and subsequent) order from the same customer, that they wrote the check from their personal account. I know for a fact that some of those customers had an IRS audit.
And the same thing in my other business, which is ag based but for the farmer's own personal consumption.
In each of those scenarios, I had to show my accounting record for each of those clients, to satisfy the IRS audit, even though I was not the one being audited.

A brother's small business was audited. From the above posters comments, you said the IRS would not bother such a business. IRS does not care what size fish you are in the kettle. My brother kept very detailed records. But it still was not good enough to satisfy IRS as they supposedly found some insignificant wimpy stuff in order to fine my brother of an outrageous amount. And cost my brother an undue amount of time, hassle and stress. And I have friends that were audited and they say the same thing.
Each of those audited people have basically told me the same thing - IRS doesn't care who you are or how good of a job you have done with your financial records, they are there to make an example of you.

Re: Pullers and IRS February 27, 2023 08:02AM
I agree,they will find any insignificant little thing to harp on...they have to justify their existence!

S'no Farmer

Re: Pullers and IRS February 27, 2023 02:28PM
This probably needs to be moved to the off topic forum. That's all I am going to say. Because no matter what I say, it won't be right.

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