steve J06

I'm wondering if anyone currently, or previously, has run their club racing/ track day setup as an enterprise for tax purposes? Care to share the pros & cons?

So far in my research, the main issue looks to be the limitation of revenue stream. I can't see generating enough revenue to have the activity declared as a "for profit" operation by the IRS which would force a limitation on expense deductions due to being a "not for profit" activity. Is it possible to have my private self pay the enterprise for use of the car? Namely, the enterprise would do all care, prep, track delivery, etc. and me the private individual would "rent" the car for the day/weekend.

Not a tax guy, nor accountant so flame away if this is all too silly.

Bad Karma

I've wondered this myself. Even thought of trying to offer some simply fabricated items as a racing income. But honestly all the forums now charge outrageous advertising fees and won't allow small item sales without getting their cut. If I could fund a company through personal purchases would it make any sense to incorporate a race "team" ?

bosco022

There is a book on the subject , "the racer's tax guide, by Steve Smith.

Chevy Nick

I'm curious about what companies track day event organizers use for their event hosting liability insurance.

steve J06

thanks. found a used copy on amazon.

Has anyone put the practices in the book to use?

RX-Ben

You will need DOT numbers and carry a log book for your tow rig if you do this, among other things.

bosco022

I have known some used car dealers that were able to write off some of their racing as advertising for their business, as it is automotive related. This was legitimate as well as they sold many, cars, trucks, trailers etc to their fellow racers and workers.

steve J06

Even if only using F250 & flatbed trailer? I suppose because it is a commercial enterprise?

RX-Ben

Correct.

LateBreak

Need to be very careful with this, ironically most insurance companies will not allow dealers/shops to sponsor racecars. Auto Owners for one will drop you on the spot if they hear that you're sponsoring a racer.

LS3FORME

Guys, I ll jump here fellow racer, CPA former IRS agent have my own firm and consult to many diff companies many in auto sports and marine etc.

The hobby loss rule mentioned above, is based upon profit motive and usually allows the IRS to see if you have a profit in 3 out 5 year, unless it is horse racing which is 7 years. But that is the wrong way to look at the deal. Most highly organzied race team that are not pro or have a large corp. sponsor are usually sponsored by the the team owners company.

A normal company- be it contruction or medical or selling widget can have advertising expense, if the owners spend that money with a company that operates a racing team as long as the expenditure qualified as advertising expense the company paying it can get a tax deduction. THe company receiving the funds has income and the racing cost is an expense.

Certain hurdles need to be met to not run afowl of the tax man here, meaning charges can not be excessive, the advertising needs to take place and it needs to be a bonfied transaction. THis would have to be documented, cars with logos, displays, ie showing that the advertising is actually taking place. Home Depot sponsor race cars, lowes, dupont, all the tire companies, viagra, etc,etc.

As far as insurances go they do have speciality companies that insure race team assets ,cars ( usually not on track racing), and drivers, but the cost of these type of item are way too prohibited for a small guy. For track events, PCA, SCCA,NASA all have insurance thru the parent orgainization.

fcarga

What LS3FORME and RX-Ben said is correct but be prepared to be audited. I looked into with my CPA and decided it was not worth the additional expense and record keeping for a 1 or 2 car amateur even though I could qualify. Your situation may be different but make sure you have a knowledgeable CPA and/or tax lawyer and detailed records to back you up.

dapopa9

Just beware of the Hobby Loss rule. If you form a business just to take a loss which would result in tax deductions you would most likely fall into the Hobby Loss IRS rule.

If you already have a valid business that generates income already then as mentioned above that company could incur advertising or sponsorship expenses which could help make your racing expense tax deductible.


Article on it - (http://www.nolo.com/legal-encycloped...ess-30000.html)

crimlwC6

Like ls3forme said, advertising for your legitimate business via the racing is the best way.

rbl

Sounds like perpetual motion ... probably would not require more than one gallon of gas - just to keep the system primed before it recirculates.

steve J06

Exactly! But this is dealing with the IRS, so any crazy thing is possible. IMO.

I appreciate the responses and it sounds like the answer is that one cannot operate a self-sustaining enterprise. What does seem possible is advertising budget of a side business I own. I've been debating on how to structure a side business involving motorsport and am now leaning towards just a general auto repair with motorsport as the advertising outlet. I don't expect to get rich this way but rather looking for a way to offset track expenses and income tax from my day job.

rbl

Save yourself some grief and just put the surplus $$ in an IRA and max 401 - go to the track and have fun.

Or, stay home, sell the car, and worry about stuff.

Buy $10K of Treasury "I" bonds and park them tax deferred. Cash them to send the kid to school ... tax is forgiven.

MarkDFW

I was wondering about this myself. Sounds like I'm screwed since I don't own my own business.