[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 675 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 675

To amend the Internal Revenue Code of 1986 to modify the application of 
           the passive loss limitations to equine activities.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 1, 1997

 Mr. McConnell introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to modify the application of 
           the passive loss limitations to equine activities.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Equine Tax Fairness Act of 1997''.

SEC. 2. APPLICATION OF PASSIVE LOSS LIMITATIONS TO EQUINE ACTIVITIES.

    (a) Determination of Material Participation.--Subsection (h) of 
section 469 of the Internal Revenue Code of 1986 (defining material 
participation) is amended by adding at the end the following new 
paragraph:
            ``(6) Treatment of equine activities.--
                    ``(A) In general.--A taxpayer shall be treated as 
                materially participating in an equine activity for a 
                taxable year if--
                            ``(i) the taxpayer's participation in such 
                        activity for such year constitutes 
                        substantially all of the participation in the 
                        activity of all individuals for such year, 
                        other than individuals--
                                    ``(I) who are not owners of 
                                interest in the activity,
                                    ``(II) who are retained and 
                                compensated directly by the taxpayer, 
                                and
                                    ``(III) whose activities are 
                                subject to the oversight, supervision, 
                                and control of the taxpayer, or
                            ``(ii) based on all of the facts and 
                        circumstances, the taxpayer participates in the 
                        activity on a regular, continuous, and 
                        substantial basis during such year, except that 
                        for purposes of this clause--
                                    ``(I) the taxpayer shall not be 
                                required to participate in the activity 
                                for any minimum period of time during 
                                such year, and
                                    ``(II) the performance of services 
                                by individuals who are not owners of 
                                interests in the activity shall not be 
                                considered if such services are 
                                routinely provided by individuals 
                                specializing in such services and such 
                                services are subject to the oversight, 
                                supervision, and control of the 
                                taxpayer.
                    ``(B) Partners and s corporation shareholders.--
                Subject to paragraph (2), the determination of whether 
                a partner or S corporation shareholder shall be treated 
                as materially participating in any equine activity of 
                the partnership or S corporation shall be based upon 
                the combined participation of all of the partners or 
                shareholders in the activity.
                    ``(C) Equine activity.--For purposes of this 
                paragraph, the term `equine activity' means breeding, 
                racing, or showing horses.''
    (b) Effective Date.--The amendment made by this section shall take 
effect as if included in the amendments made by section 501 of the Tax 
Reform Act of 1986.
                                 <all>