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Paying for a horse

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  • Paying for a horse

    I was just wondering - how is the safest way to pay or be paid for a horse these days? With all of the wire transfer fraud, phony cashier's checks, etc., how do people do it safely??
    A proud friend of bar.ka.

  • #2
    Safest way is to retain ownership until funds are cleared.
    www.midatlanticeq.com
    Mid-Atlantic Equitation Festival,Scholarships and College Fair
    November 11-13, 2016

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    • #3
      I have the banks call each other directly and do a wire transfer. That way neither person has the other persons account information. Never had a problem. The person sending the money gives their bank the other banks contact information and they wire the money. Give them the name of a personal banker at your bank that they can call directly, and of course you would have given that banker the pertinent information. X amount of money coming from this person who banks at......... If you are sending money, ask for a personal banker and phone number for their bank, and it goes the reverse way.

      Comment


      • #4
        What do you do about the over 10K govt reporting? Is that income in some or all cases?

        Comment


        • #5
          Why would proceeds from sale of a horse by a private party be income? The commission would, but not the sale price. Right?
          2012 goal: learn to ride like a Barn Rat

          A helmet saved my life.

          Comment


          • #6
            Never had a problem with the bank reporting the sales proceeds of a horse I sold to the IRS. It was definately over $10,000.

            Comment


            • #7
              Banks are only required to report transactions over $10k to the gov. if the transaction is cash.

              Comment


              • #8
                Most guaranteed ways would be:
                1) Cash in your hand
                2) Wire transfer done by information transferred from banks (this can get a little sticky, depending on which banks you're dealing with)
                3) Certified cheque (call the bank to verify that the cheque was certified there)
                4) Bank draft

                The cheapest for the purchaser would be cash, certified cheque, or draft. The fees involved in a wire can be rather high, yet may be the only option for some transactions.
                All that is gold does not glitter;
                Not all those who wander are lost.
                ~J.R.R. Tolkien
                http://theimperfectperfecthorse.blogspot.com/

                Comment


                • #9
                  While bank checks (cashier's checks) can easily be forged, I personally don't think the average bank check forger is probably wasting their time trying out and buying horses. So I do accept cashier's checks in most instances. If it was from a Nigerian bank I probably would not accept it.

                  However, if I'm ever uncomfortable about a situation, I will have the person do a wire transfer. Because of the fees associated with a wire transfer a cashier's check is preferable to many buyers.

                  Cash is a great option, but some buyers are uncomfortable carrying large amounts of cash. Whenever I accept cash I count the money in front of the person and give a written receipt with the date, the amount my signature and keep a copy so that there is a clear written record of the cash changing hands.

                  A personal check is also an option, however, I won't release the horse until the check has cleared, and I confirm this by calling my bank and speaking to a live person who confirms it. Having dealt with bad checks from a client in the past, sometimes it takes a little longer than you think to be sure it has gone through.

                  Comment


                  • #10
                    Because I bought my horse in Canada, I had to wire the money internationally and provide proof that I'd wired it before the horse was released to me. My trainer is friends with the selling agent so we worked out that the horse was "in training" in Canada to avoid the extra GST.
                    “Thoroughbreds are the best. They’re lighter, quicker, and more intelligent.” -George Morris

                    Comment


                    • #11
                      Originally posted by TheHorseProblem View Post
                      Why would proceeds from sale of a horse by a private party be income? The commission would, but not the sale price. Right?
                      From what I understand, both the commission (for the agent) and the sale proceeds (for the seller) count as income for tax purposes. I'd check really carefully with a tax attorney before not declaring that income.
                      According to the Mayan calendar, the world will not end this week. Please plan your life accordingly.

                      Comment


                      • #12
                        Originally posted by TheHorseProblem View Post
                        Why would proceeds from sale of a horse by a private party be income? The commission would, but not the sale price. Right?
                        Assuming that by "private party" you mean someone for whom horses are a hobby, not a business...

                        If you sold the horse for more than you spent on it (purchase price plus direct expenses) then you have to pay tax on the difference as "hobby income".

                        If the purchase price plus direct expenses is greater than what you sold the horse for, then you do not have to pay tax on the sale (but you can't take it as a loss)
                        Janet

                        chief feeder and mucker for Music, Spy, Belle and Tiara. Someone else is now feeding and mucking for Chief and Brain (both foxhunting now).

                        Comment


                        • #13
                          Even if horses are a hobby you can end up owing capital gains taxes if you sell for more than you paid/invested.

                          Comment


                          • #14
                            Originally posted by Wholehearted View Post
                            Because I bought my horse in Canada, I had to wire the money internationally and provide proof that I'd wired it before the horse was released to me. My trainer is friends with the selling agent so we worked out that the horse was "in training" in Canada to avoid the extra GST.
                            As long as the horse was going to be exported it would be GST (or HST depending on the province of purchase) exempt.

                            No need to concoct a story about the horse being in "training"
                            www.OneJumpAhead.ca

                            Comment


                            • #15
                              Originally posted by Janet View Post
                              Assuming that by "private party" you mean someone for whom horses are a hobby, not a business...

                              If you sold the horse for more than you spent on it (purchase price plus direct expenses) then you have to pay tax on the difference as "hobby income".

                              If the purchase price plus direct expenses is greater than what you sold the horse for, then you do not have to pay tax on the sale (but you can't take it as a loss)
                              Good info!!

                              I know my bank has a notice up saying that all transactions (not cash, just plain ole transactions) over $10k will be reported.

                              As for how I buy, cash. Handing over a chunk of cash makes sellers happy, and makes me happy too. Granted I've not purchased anything uber expensive, I imagine getting a loan and cashing it at your bank would work too? Or a cashier's check. When I sold horses, I did accept checks, but here's a little known fact: you can take your check to your bank, and prior to depositing it, ask the bank to contact the other bank and verify it is good. Defeats fraudulent, NSF and stopped checks. All the other bank says is that there is enough money to cover the amount on the check, not how much is in the account or anything personal.

                              I wonder about using Paypal nowadays though?? Or credit card?
                              COTH's official mini-donk enabler

                              "I am all for reaching out, but in some situations it needs to be done with a rolled up news paper." Alagirl

                              Comment


                              • #16
                                Originally posted by loshad View Post
                                From what I understand, both the commission (for the agent) and the sale proceeds (for the seller) count as income for tax purposes. I'd check really carefully with a tax attorney before not declaring that income.
                                I am not a tax expert, by any stretch, but that makes zero sense to me. If that were true, then eBay would have to issue 1099 for every sale.

                                An agent operates a horse sale business. If I, a hobbyist, buy a horse for 10K and sell it for 12K two years later, where on the income tax form do I list proceeds from a sale? It's not an investment like real estate or stocks that one hopes to profit from.
                                2012 goal: learn to ride like a Barn Rat

                                A helmet saved my life.

                                Comment


                                • #17
                                  from the horse's moutn, so to speak (my bold)

                                  Business or Hobby? Answer Has Implications for Deductions


                                  FS-2007-18, April 2007

                                  The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit.

                                  In order to educate taxpayers regarding their filing obligations, this fact sheet, the eleventh in a series, explains the rules for determining if an activity qualifies as a business and what limitations apply if the activity is not a business. Incorrect deduction of hobby expenses account for a portion of the overstated adjustments, deductions, exemptions and credits that add up to $30 billion per year in unpaid taxes, according to IRS estimates.

                                  In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.

                                  In order to make this determination, taxpayers should consider the following factors:

                                  Does the time and effort put into the activity indicate an intention to make a profit?
                                  Does the taxpayer depend on income from the activity?
                                  If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
                                  Has the taxpayer changed methods of operation to improve profitability?
                                  Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
                                  Has the taxpayer made a profit in similar activities in the past?
                                  Does the activity make a profit in some years?
                                  Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
                                  The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.

                                  If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.

                                  Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). These deductions must be taken in the following order and only to the extent stated in each of three categories:

                                  Deductions that a taxpayer may take for personal as well as business activities, such as home mortgage interest and taxes, may be taken in full.
                                  Deductions that don’t result in an adjustment to basis, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
                                  Business deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.
                                  2012 goal: learn to ride like a Barn Rat

                                  A helmet saved my life.

                                  Comment


                                  • #18
                                    Originally posted by TheHorseProblem View Post
                                    I am not a tax expert, by any stretch, but that makes zero sense to me. If that were true, then eBay would have to issue 1099 for every sale.

                                    An agent operates a horse sale business. If I, a hobbyist, buy a horse for 10K and sell it for 12K two years later, where on the income tax form do I list proceeds from a sale? It's not an investment like real estate or stocks that one hopes to profit from.
                                    First of all, the expense side is "what you paid for it" ($10k in this case) PLUS your expenses for the two years (board, vet, training fees, show fees, farier fees, etc.)

                                    If you are still showing a profit after including the expenses (doesn't happen very often) you would list it as "hobby income" on the line for "other income".

                                    Go to the IRS web site and search for "hobby income".
                                    Janet

                                    chief feeder and mucker for Music, Spy, Belle and Tiara. Someone else is now feeding and mucking for Chief and Brain (both foxhunting now).

                                    Comment


                                    • #19
                                      Janet, are just well-versed or are you, by chance, a CPA/tax person?
                                      COTH's official mini-donk enabler

                                      "I am all for reaching out, but in some situations it needs to be done with a rolled up news paper." Alagirl

                                      Comment


                                      • #20
                                        Originally posted by TheJenners View Post
                                        Janet, are just well-versed or are you, by chance, a CPA/tax person?
                                        Nope, I am computer/communications person.

                                        But I looked into it in detail when I sold a horse- sales price was a lot higher than purchase price, but once I added in the direct expenses I had a loss.
                                        Janet

                                        chief feeder and mucker for Music, Spy, Belle and Tiara. Someone else is now feeding and mucking for Chief and Brain (both foxhunting now).

                                        Comment

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