HOW 3,908 HORSES GOT IN LINE FOR THE KEENELAND SEPTEMBER YEARLING SALE
The process to catalog 3,908 yearlings for the 70th Keeneland September Yearling Sale, which starts at noon on Monday, combines a good old-fashioned eye for horses with computer wizardry. The goal is to please both consignors and buyers and present the most successful sale possible.
This year, Keeneland redesigned the format of the sale as a result of input from consignors and buyers. The 12-day auction, which runs through Saturday, Sept. 21, spans three distinct markets: Week 1, the weekend, and Week 2.
“We’ve been adjusting the format for the last couple of years to move with the market,” Keeneland Director of Sales Geoffrey Russell said. “We feel this new format will work very, very well.
“Starting the Book 1 sessions at noon as opposed to 11 a.m. last year gives buyers plenty of time to move through the barns in a manageable way to see all the horses before the sale starts and gives consignors plenty of opportunity to sell their horses,” he added.
Here’s how the sale is organized:
So how did 3,908 yearlings find their spots in the marathon sale?
The process began on May 1, the deadline to enter the sale. “Then we take a selection of the horses that were entered and we physically evaluate them,” Russell said.
Soon after the Kentucky Derby until July 4, Keeneland’s two inspection teams traveled extensively to look at about 2,200 yearlings.
“With input from our consignors and the information of the physical evaluation notes that we have and our own internal computer system, we then graded the horses and placed them where we thought they will best sell,” said Russell, who spends hours studying the information to ensure the order in which the horses are presented is the most effective.
“The computer system gives you the guide, then you also have the physical component, which can change anything,” he added.
For each book, the dams of the yearlings were placed in alphabetical order, and a letter was randomly selected to determine which letter will appear first in the catalog. Therefore, Hip No. 1 is out of Fairy Princess. The final horse in Book 1 is out of Eyes On Eddy.
Russell called the yearlings in this year’s sale “a solid group of horses.” By Sunday morning, activity at the barns indicated they were attracting a lot of interest.
“There’s a great air of anticipation and excitement here,” Russell said. “We’re just looking forward to getting it started.”
VIDEO: CONSIGNORS MOVE IN
Beautiful, milder-than-usual summer weather in Central Kentucky highlights the work of consignors as they set up for the Keeneland September Yearling Sale in this video by Keeneland’s Broadcast Services crew: http://youtu.be/iQ4CG6pdUzk.
CATALOG UPDATES AVAILABLE ONLINE
For the latest list of all pedigree updates for yearlings in Book 1 of the Keeneland September Yearling Sale, visit http://flex.keeneland.com/updates/updates.html.
CONSIGNORS COMMENT ON PRE-SALE ACTIVITY
Craig Bandoroff, Denali Stud: “They’re looking at them (yearlings), so everybody’s pretty optimistic. You just gotta stay level-headed. Everybody thinks (the sale is) going to be good; all indications are it’s going to be good…. The world’s in a better place. I think the horse business is in a better place.”
Gabriel Duignan, Paramount Sales: “It’s been unbelievable. It started the minute we started showing Friday morning and hasn’t let up. There’s a great buzz around the place.”
Michael Hernon, Director of Sales, Gainesway: “We’ve got great action. … The amalgamation of Book 1 into Book 2 is a very progressive move. People in past years were slightly wavering away from Book 1. Now that they’re together, it’s going to raise the market and there’s going to be a very good clearance rate. I would say it’s a great move by Keeneland. We’re delighted to be here. This is the super market of horse sales.”
John Sikura, Hill ‘n’ Dale Farm: “We’ve had great action at the barns. We’ve showed a lot of horses. Everybody seems positive and encouraged and enthusiastic to buy horses. You get a sense that the interest is deeper and more widespread than it’s been in the past several years.”
SALES PAVILION OFFERS PREVIEW OF SPORTING ART AUCTION; CATALOGS AVAILABLE IN LIMESTONE CAFE
Visitors to the Keeneland Sales Pavilion will quickly note the fine sporting art, American paintings, and sculpture on display. The reason is because the pieces were cataloged for the inaugural Sporting Art Auction at Keeneland on Nov. 20, and they are being exhibited to preview the event.
Those who are interested in the auction may pick up catalogs from Sporting Art Auction representatives in the Limestone Café in the Sales Pavilion, or via online at http://www.thesportingartauction.com/catalog-2/. The Sporting Art Auction welcomes inquiries through its website, www.thesportingartauction.com; by email at email@example.com; or through Cross Gate Gallery in Lexington, Kentucky, at (859) 233-3856.
The Sporting Art Auction, a new company formed by Keeneland and Cross Gate Gallery of Lexington, represents a collaboration between the world’s largest Thoroughbred auction house and the country’s premier gallery of fine sporting art and contemporary British figurative painting. The auction features 174 high-quality lots, featuring works by such renowned artists as Sir John Frederick Herring, Sir Alfred Munnings, Edward Troye, Franklin Voss, Peter Curling, and Andre Pater. The auction also includes works by three generations of Wyeths – grandfather N.C., father Andrew, and son Jamie – and the American painter Mary Cassatt.
“This Sporting Art Auction has the potential to become the most important of its kind in the world,” said Cross Gate owner Greg Ladd. “We have all the right elements to make it a success: a world-class venue in Keeneland, which provides in-house expertise in conducting major auctions, and the ability to reach the most enthusiastic sporting art collectors in the world through Keeneland’s racing and sales clientele.”
Among the auction’s most important pieces are several by Munnings, including Blue Prince II, a 26½” x39¼” painting commissioned by Thoroughbred owner and breeder Walter Jeffords. Munnings, who died in 1959, is regarded as one of the world’s finest equine painters. Also cataloged is Troye’s iconic portrait of the 19th-century stallion Lexington.
“Greg is widely recognized as one of the world’s experts on sporting art, so we are fortunate to partner with someone of his caliber on this project,” said Keeneland Vice President of Sales Walt Robertson “The uniqueness of Keeneland’s proximity to an influential clientele allows the art to be showcased for an extended period of time to a captive audience of sporting art enthusiasts.”
From Keeneland’s perspective the auction is in keeping with the association’s mission, both sporting and altruistic. Keeneland’s portion of the auction proceeds will benefit its non-profit initiatives, including the Keeneland Library Foundation.
TAX EXPERT REMINDS BUYERS ABOUT INCENTIVES
The following was written by Thomas A. “Tad” Davis, author of the 2013 edition of Horse Owners and Breeders Tax Handbook and tax counsel for the National Thoroughbred Racing Association and the American Horse Council. Davis urges readers to consult their tax adviser for additional information.
For those considering the purchase of a horse at the Keeneland September Yearling Sale and the Keeneland November Breeding Stock Sale, it is worth looking at the tax incentives available this year. Three incentive provisions apply:
1) Expense Provision, which allows the purchaser to expense (write off) all or a portion of the purchase price of a horse, including yearlings;
2) Bonus Depreciation, which allows the purchaser to write off 50% of the purchase price of a yearling; and
3) Three-year Depreciation on the purchase of any racehorse, including yearlings.
One or even all three of these provisions can apply to a single purchase provided the horse qualifies and is placed in service in 2013.
The following is a summary of the provisions with the potential tax benefits that might be available to a purchaser. Since, like most tax provisions, they have technicalities that must be met, a purchaser who wants to use one or more of the provisions should consult his or her tax adviser to make sure the provisions apply to his or her situation.
Expense Provision: A purchaser can deduct up to $500,000 of the cost of a horse or horses purchased in 2013 provided (1) the total of all purchases of horses and other depreciable business property does not exceed $2 million and (2) the horse is placed in service by the purchaser in 2013.
If the purchase exceeds $2 million, the amount that can be expensed in 2013 is reduced $1 for each dollar the amount of such purchases exceeds $2 million. For example, a person purchases two yearlings – one for $300,000 and one for $250,000 – and made no other purchases of horses or other business property during 2013. The purchaser can expense $500,000 of the cost. The remaining $50,000 can be depreciated using one or both of the depreciation methods explained below.
Note that the expense provision applies to purchases of horses of all ages and to other types of business property new or used such as tractors and other farm equipment. Also note that purchases of property used in any business of the purchaser, not just the horse business, is included in the $2 million threshold.
One other restriction: The expense deduction can only be used against the aggregate taxable income derived by the purchaser from a business, any business, including compensation earned as an employee.
Bonus Depreciation: This provision allows the purchaser of certain horses in 2013 to depreciate 50% of the cost if the horse is placed in service that year. To qualify, the original use of the horse must commence with the purchaser whether such use corresponds to the use of the purchaser. This means that yearlings at the sale most likely can qualify, but older horses likely will not.
It has been industry practice for many years to treat young racehorses as placed in service when conditioning and training first begins. Thus, under this practice, a yearling would be placed in service when conditioning and training begins.
There is no limit on the total dollar amount that can qualify for bonus deprecation provided the yearling(s) are “placed in service” in 2013. For example, if a purchaser buys and places in service 10 yearlings in 2013 for a total cost of $2 million and that was the only purchase of depreciable business property that year, the purchaser could, using the expense provision, deduct $500,000 and take bonus depreciation of $750,000 (50%x$1.5 million). The $750,000 balance of the cost would be deducted over a three-year period using the regular depreciation rules explained in the next section.
Three-year Depreciation: All racehorses purchased and placed in service in 2013 can be depreciated over a three-year period (four calendar years) using an accelerated rate. This means a
deduction of 25% of the purchase price of a yearling, if neither the expense deduction, nor bonus depreciation is taken, and 50% of the remaining balance of the purchase price in 2014. In other words, 62.5% of the purchase price of the yearling can be written off in the first two years.
If the expense deduction, bonus depreciation, or both are taken, 25% of the remaining balance after the other deduction(s) are taken can also be deducted in 2013 and 50% of the balance in 2014.
All of these incentives are scheduled to change next year unless Congress acts to extend or change them. The expense deduction is scheduled to decrease to $25,000 next year; bonus depreciation is scheduled to expire altogether; and the three-year depreciation for young racehorses not over 2-years-old when placed in service is scheduled to return to seven years. Because of the discussions in Congress about reforming the tax code, it is hard to predict when and what Congress might do with respect to these three incentive provisions.
SPOTLIGHT ON RECENT SEPTEMBER SALE GRADUATES
Cleburne, winner of last night’s Iroquois (G3) at Churchill Downs, is a graduate of Keeneland’s 2012 September Yearling Sale. Jerry Crawford’s Donegal Racing paid $310,000 for the son of Dixie Union, who was consigned by Denali Stud, agent.
Oxbow and Palace Malice, both graduates of the 2011 September Yearling Sale, swept two of this year’s Triple Crown classics, the Preakness (G1) and Belmont (G1), respectively. Calumet Farm owner Brad Kelley purchased Oxbow in the name of his Bluegrass Hall LLC for $250,000 from consignor Burleson Farms, agent (click here to see auction video). Consigned to the 2011 September Sale by Lane’s End, agent, Palace Malice brought $25,000 from Colin Brennan, agent (click here to see auction video). Niall Brennan consigned the colt the following year to Keeneland’s April Two-Year-Olds in Training Sale, where he sold to owner Dogwood Stable for $200,000.
In addition, the Sales section of Keeneland’s website – www.keeneland.com/sales -- contains a wealth of useful information, including a catalog search feature:
A Media Kit about the sale, including statistical information and biographies of leading consignors and buyers, is available at:
The entire sale will be streamed live on www.keeneland.com. Highlights will appear on Keeneland’s Facebook and Twitter page (hashtag #keesept).