777 Gambling Carnaval
Gambling and Horse Racing on the Mix
The transition from a betting to a purse economy -- coupled with high income-tax rates, has created a new kind of financial problem for the owners of big money winners.
The purses are taxable as income; so are the stud fees for a stallion, and these run as high as $10,000 for each of the thirty-five or more services he performs in a year.
Rather than pay the taxes on this income, the owner may prefer to sell the horse and take a capital gain.
The most likely buyer these days is a syndicate, which divides the horse into 'shares,' usually about thirty-five.
An owner who is fond of a horse, but feels obliged to sell it for tax reasons, often compromises by buying some shares of the syndicate for himself.
Syndicates have paid over $1 million for horses, with part of the return on this investment expected to come during the horse's short racing life and an additional return coming from a long stud life (say, 10-15 years).
Texas oilman Ralph Lowe's Gallant Man, one of the greatest horses in recent years, was syndicated at stud for $1,333,333. Tom Fool handicap champion of 1953, was syndicated for $1,750,000. Bally Ache was syndicated by Fruchtman for a reported $1,250,000.
John Galbreath, the real estate man, is one of the very few big buyers who have taken on big horse properties singlehandedly.
He paid $2 million for Swaps, the great champion from California, and he imported the undefeated Italian and European champion, Ribot, on a five-year lease for which he paid $1,350,000.
How much sense do such prices make? In general, the prices make sense when the horses 'prove out' - say, when the great horses prove that they can pass on their greatness.
Owners come into the sport mainly in one of three ways: by buying an active racehorse; by buying a yearling, which is the commonest way; or by buying one or more mares and breeding their own horses.
However they get into racing, there is no substitute for being lucky.
Jack Dreyfus, head of the Dreyfus fund, has had a taste of good and bad luck as an owner. He once came to admire the late Louis B. Mayer's fine mare Bellesoeur.
The mare got a colt, Beau Gar, by Count Fleet, and Dreyfus bought a quarter-interest in the colt. The colt was injured, and never showed his potential, but Dreyfus still liked him, and bought out the other partners.
As it happened, he paid one of the partners with $7,000 in Polaroid stock, which later got to be worth $230,000. Then he sent Beau Gar to stud, rented mares for him, and developed a substantial breeding and racing establishment.
His best product so far is Beau Purple, a three-year-old who had a couple of good races, suddenly became a Derby hopeful, went to Louisville, and won the Derby Trial in fast time. But in the Trial, Beau Purple received an injury that prevented Dreyfus from starting the horse in the Derby.