By: Lindsey Heumann
It’s that time of year when I become the most popular member of the WPT Team!
We’re busy working on approximately 180 tax returns for the 2023 tax year. We do our best to get our Partners their Schedule K-1s as quickly as possible. The Schedule K-1 distribution process is typically completed by the last day of February.
For most of our new Partners, it’s their first time receiving a Schedule K-1, accounting statement, and/or capital call invoice. This can be pretty overwhelming.
With 13 years under my belt at WPT, I can easily address the most common questions I receive with the first round of accounting statements and capital call invoices.
Accounting Statements
Statements are prepared quarterly when a horse begins racing or turns three years old, whichever occurs first. If a horse runs as a 2-year-old, there will only be purse earnings, race-related expenses, and hopefully distributions. All other expenses were included in the original syndication price (daily training, veterinary, transportation, insurance).
Once the horse enters its 3-year-old year, the partnership is responsible for the daily training, board, veterinarian, insurance, and other maintenance expenses. The partnership account is then evaluated on a quarterly basis for potential capital calls. The calculation is done approximately 45 days after the end of the prior quarter (i.e., February 15th for the 4th quarter of the prior year and May 15th for the 1st quarter of the current year). We bill the partnerships halfway through the current quarter.
All of the statements are posted on the website and are located under the “Financials” section of the website (viewable to Partners only). Hard copies are always available; please email me to receive a copy.
A few things to remember about the statements:
-Accounting statements reflect the West Point LLC’s ownership in the horse, not the individual Partner’s ownership. The WPT LLC’s ownership percentage, if different than 100% of the horse, is indicated next to the horse’s name.
The capital call calculation on the bottom section of the statement is based on the following factors:
-The average cost per quarter for training (daily rate, stall rent (if applicable), and the blacksmith is approximately $12,000 – $14,000.
–Veterinary expenses vary per horse – the calculation is based on the prior quarter’s actual expenses and the horse’s training status (at the track vs. on the farm) at the time the statements are being prepared.
–Other represents the estimated vanning and one-off expenses incurred during the year. For Q1, this includes the cost of the tax return preparation fees, which are paid in March.
–Purse money earned through the date the statements are prepared is factored into the calculation to reduce capital calls to the LLC.
Capital Call Invoices
Invoices are generated within a week of the accounting statements being posted to the website. Each Partner receives one invoice with all of the horse(s).
These statements are emailed directly from the billing software. Hard copies are always available; please email me to receive a copy.
Important things to remember:
-The first page of the invoice summarizes the Partner’s share of the capital call for each horse(s) listed.
-On the second page, the capital call for each horse/LLC is listed, with the ownership percentage in each LLC.
PLEASE NOTE: The ownership percentage shown on this statement is the ownership in the LLC. For example, if the LLC owns 50% of the horse, a Partner’s 5% investment in the horse is equal to 10% of the LLC (if the LLC owns 25% of a horse, it’s 20% of the LLC). The % ownership will agree to the ownership percentage on the original documents received at the time of purchasing the interest in the horse. This percentage will also agree with the Schedule K-1 ownership percentage.
– Partners may elect to apply any distributions throughout the year to their training account/future capital calls. All you have to do is respond to my email asking for the distribution to be held on account.
The majority of payments for capital calls are made via personal check. There is a payment link on the capital call invoice that allows for online payments (credit or debit cards).
