How do you determine the value of your weanlings ?
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StealingKat
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How do you determine the value of your weanlings ?
Does anyone have a formula for determining the value of your young stock? Also how does one determine the value of a broodmare so that one breeds her to a suitable stallion and does not over breed her? I know this is relative but for tax purposes I need to know the value of my horses. I will be getting an appraisal done, but I am curious how do they come up with the $$$$$ numbers?
Always bet on the grey!!
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wilf
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Dear Kat dont take this personally but if I am valueing stock for tax purposes then they are priceless or worthless.Take a figure out of thin air for your personal valuation and divide it by the number of legs they have , then sit down have a drink and divide that figure by the number of things that can < and probably will > go wrong then you are getting close. No wonder we scream and shout and jump up and down when it all falls into place and we smile for the win-photo, simply because its a miracle.! Best Wishes up in B.C.
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StealingKat
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Hey,
Wilf thanks for the info. Not sure how things work in the US but in Canada horses are considered property. I will be paying GST. Goods and Services tax on the ponies that I have purchased in the States this season. I will also have to deduct them as an expense on my 2005 income tax. I have to be careful when I bring the kids over the border or I will end up paying more in tax than I did purchase price. No offense taken on anything said at all. I asked for info and got a response, that is important to me. I am new at this business . I would be a fool not to listen to advice. Things are going great ! (thanks to my post on this board) I have some amazing mares, have made some great friends AND I am doing what I have a passion for. I really am truely blessed.
JT
Wilf thanks for the info. Not sure how things work in the US but in Canada horses are considered property. I will be paying GST. Goods and Services tax on the ponies that I have purchased in the States this season. I will also have to deduct them as an expense on my 2005 income tax. I have to be careful when I bring the kids over the border or I will end up paying more in tax than I did purchase price. No offense taken on anything said at all. I asked for info and got a response, that is important to me. I am new at this business . I would be a fool not to listen to advice. Things are going great ! (thanks to my post on this board) I have some amazing mares, have made some great friends AND I am doing what I have a passion for. I really am truely blessed.
JT
Always bet on the grey!!
Since you are new at this and since you obviously haven't done this before... and since this is a significant business expense (and potential deduction), I would hunt down, contact, and use the best equine accountant possible.
Sure, using a top professional will come at a cost, but if you have him explain things thoroughly, and make a commitment to learn what he is doing and telling you, then you should be in much better shape to do this yourself in years to come. Basically, you are paying him to teach you how to do it yourself, in addition to how you should handle it this year.
As for value of weanlings... that is difficult... in fact, valuation of any horse is difficult. There very well may be some "rule" of thumb, which the equine accountant should know. Otherwise, you must remember that in developing these "numbers" you better be able to justify and fully support them with research and examples.
I, personally, look at recent sales averages for that particular stallion, then evaluate against my mare. The value will change based upon how my mare's prior foals sold against their sires average. I then deduct for poor conformation, and add additional for good conformation. Then, I deduct another 25%, or so, to account for market manipulation of the stallions numbers, and to try to account for some unforeseen fluctuations.
If you have them insured, you had better use the same number as is on the insurance. The reason for this is easy... in case of audit. Simply, if these numbers are different, someone is going to think you are a crook... and both are going to look at you harder in the future.
I probably wouldn't bother with an appraisal because just having the number isn't going to provide you with the best answer. The appraiser won't be able to help you as much as the accountant can. It is kinda' like betting. How you bet is often more important than who you bet. There are an awful number of guys who can "get" the right horse, but lose money because they cannot "bet" it correctly.
Sure, using a top professional will come at a cost, but if you have him explain things thoroughly, and make a commitment to learn what he is doing and telling you, then you should be in much better shape to do this yourself in years to come. Basically, you are paying him to teach you how to do it yourself, in addition to how you should handle it this year.
As for value of weanlings... that is difficult... in fact, valuation of any horse is difficult. There very well may be some "rule" of thumb, which the equine accountant should know. Otherwise, you must remember that in developing these "numbers" you better be able to justify and fully support them with research and examples.
I, personally, look at recent sales averages for that particular stallion, then evaluate against my mare. The value will change based upon how my mare's prior foals sold against their sires average. I then deduct for poor conformation, and add additional for good conformation. Then, I deduct another 25%, or so, to account for market manipulation of the stallions numbers, and to try to account for some unforeseen fluctuations.
If you have them insured, you had better use the same number as is on the insurance. The reason for this is easy... in case of audit. Simply, if these numbers are different, someone is going to think you are a crook... and both are going to look at you harder in the future.
I probably wouldn't bother with an appraisal because just having the number isn't going to provide you with the best answer. The appraiser won't be able to help you as much as the accountant can. It is kinda' like betting. How you bet is often more important than who you bet. There are an awful number of guys who can "get" the right horse, but lose money because they cannot "bet" it correctly.
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StealingKat
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Taking the step from hobby breeding to full time business is very exciting, however I have watched many people in the horse world fail. One of the biggest reasons is book keeping. Seems the successful farms keep everything organized and straight and just keep going from there. Canada has some strange new tax rules . As I am "middle" class we get nailed to the cross as far as tax goes. I have to do this right or the government just comes in makes up numbers on an audit and then leaves you to prove that your books were correct. I've seen it over and over. For me I want it correct from the word go, save me a potential head ache down the road. The horses, pedigrees, feeding and training are the easy part......
Always bet on the grey!!
dum te dum... yup Governments can be scary.. I am always thankful for my beancounter husband (CPA).. while he might not be able to jump on a horse and exercise it, help break a yearling, groom a stallion, etc., no bank statement goes unreconciled in my house more than thirty minutes after it arrives in the mail. And he's kinda cute. Looks good on the tractor in his outback oilskin and cowboy hat.
We got audited by the IRS a couple of years ago, I used to have Really Roller Coaster income, some years chickens some years feathers. Like $80K one year, $350K the next... anyhow, they dug and scurried about for months and could not find ONE THING.... sent us a nice letter saying our returns were left as filed, no errors.
Having a great accountant is paramount, if I wasn't married to one I would sure hire one. Keeping neat books is also important, whether manual or computerized, this will SAVE YOU MONEY. Having a separate bank account for the horse part of your life makes it Much Easier, not to mention it illuminates that the horse thing is Not a Hobby.
As for your taxes, SK, I, as a former Canadian, can truly feel your pain. However, as I may have mentioned to you, the purchase price for the horse is sufficient proof of value, and they cannot tax you for MORE than you paid for the horse. Until we get Kelley Blue Book or NADA for horses, the number we can prove is the purchase price and no one in Revenue Canada can argue any different. Valuing your young stock (weanlings, yearlings) for tax purposes could probably be restricted to the stud fee. If you run your farm like mine, you have a blanket policy insuring your horses at a baseline value, but not a composed list with each one having an equine appraisal, etc. If not, as KAL said, you will have to report the value of the horse at its insured value (don't lie to the Feds). Good luck, hopefully after taxes are done you will still be able to afford hay.
We got audited by the IRS a couple of years ago, I used to have Really Roller Coaster income, some years chickens some years feathers. Like $80K one year, $350K the next... anyhow, they dug and scurried about for months and could not find ONE THING.... sent us a nice letter saying our returns were left as filed, no errors.
Having a great accountant is paramount, if I wasn't married to one I would sure hire one. Keeping neat books is also important, whether manual or computerized, this will SAVE YOU MONEY. Having a separate bank account for the horse part of your life makes it Much Easier, not to mention it illuminates that the horse thing is Not a Hobby.
As for your taxes, SK, I, as a former Canadian, can truly feel your pain. However, as I may have mentioned to you, the purchase price for the horse is sufficient proof of value, and they cannot tax you for MORE than you paid for the horse. Until we get Kelley Blue Book or NADA for horses, the number we can prove is the purchase price and no one in Revenue Canada can argue any different. Valuing your young stock (weanlings, yearlings) for tax purposes could probably be restricted to the stud fee. If you run your farm like mine, you have a blanket policy insuring your horses at a baseline value, but not a composed list with each one having an equine appraisal, etc. If not, as KAL said, you will have to report the value of the horse at its insured value (don't lie to the Feds). Good luck, hopefully after taxes are done you will still be able to afford hay.
So Run for the Roses, as fast as you can.....