Thoroughbred Horse Partnership

Question
Hi,

When I buy share/partnership in a horse ($20,000 for 12%), do i own 12% of the horse lifetime earning or for only one year of the horse earning?

thanks

Nhat "Mike" Dinh

Answer
Dear Mike,
Good question!  The answer may very from partnership to partnership, however I will answer now on behalf of Dapple partnerships (most proper).  When one buys a 10% ownership in a partnership for a horse, the individual is buying 10% of an LLC created to own the horse with the horse being the primary asset and to also include some capital in the bank account for upkeep purposes.  The new owner has become a shareholder in the LLc, and will receive quarterly financial statements to reflect the cash in the bank, outstanding bills and bills paid during the quarter.  Earnings will show in the income lines, and the amount of cash in the bank will determine whether or not and when a pro rata cash distribution can be made to the shareholders.  Shareholders receive K-1 reports from our CPA to turn into their CPA at tax time which reflect any distributions or payment, as well as depreciation on the asset.  Please feel free to ask more questions anytime.  Thanks, Lora Brown