[Fot] Sponsorship of Vintage Racing

[John Frymark]

While the topic of Corporate Sponsorship in vintage racing can be  
viewed (critiqued?) in many ways, there is a tax implication that  
should be considered. I am no tax expert. I looked into something  
similar a while ago so I can offer these comments.

A sponsor can justify their expenditure as advertising expense if it  
meets basic "smell tests", i.e. an activity that gets their name or  
product in front of their target market generating sales and/or  
goodwill.

A for-profit entity receiving this sponsorship treats it as income.  
Unfortunately, it is impossible to claim that amateur vintage racing  
by itself, with no prize money, is a for-profit activity. It is  
therefore considered a hobby and "There is a one-way tax rule for  
hobbies: Income from a hobby is taxable as "other income" on form  
1040; EXPENSES ARE DEDUCTIBLE ONLY TO THE EXTENT YOU REPORT HOBBY  
INCOME, and the deduction is limited on Schedule A by the 2% adjusted  
gross income (AGI) floor for miscellaneous deductions. Hobby losses  
are considered NONDEDUCTIBLE PERSONAL LOSSES. A profitable sale of  
hobby collection or activity held long term is taxable as a capital  
gain; losses are NOT deductible." JK Lasser's federal Tax Guide 2003

As we have all seen at Vintage Races, some participants have  
"sponsorship" by their own businesses. Gil Nickels' Far Niente Winery  
brought the transporter, cars, support crew, hospitality tent... the  
whole nine. I am sure this was all part of the winery advertising  
budget and assets of the business. Generally, the nature of hobby  
racing makes our expenses purely out-of-pocket...unless we have a  
sideline income producing business that benefits from our racing  
activities. Maybe some other FOTers want to weigh in here.