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Original Issue

2, 4, 6, 8, who do we depreciate?

Gun Bow, that's who—the million-dollar horse now eclipsing Kelso and attracting the tax man's eye

Has Kelso had it? The remarkable 7-year-old gelding, winner of $1,634,952 and 32 of his 51 races, was paraded past Saratoga's magnificent elms and into the winner's circle the other day in recognition of his unprecedented fourth straight Horse-of-the-Year title. But that was for 1963. As they applauded, his viewers knew that only a sensational fall season at Aqueduct could redeem a dismal 1964 campaign and produce a fifth crown for Mrs. Richard C. duPont's champion. Few thought it likely.

The odds are that the 1964 Horse of the Year will be a 4-year-old named Gun Bow who has swept into the handicap division with hurricane force. He began to attract attention in January when he won the mile-and-a-quarter Charles H. Strub Stakes at Santa Anita by 12 lengths. Last month at Aqueduct, going the same distance in the Brooklyn Handicap. Gun Bow was clocked in 1:59[3/5]—the fastest 10 furlongs in the history of New York racing. Again he won by 12 lengths, this time over the proved runner Olden Times, while Iron Peg and Kelso trailed. He races next in the $100,000-added Washington Park Handicap in Chicago on August 22.

Three times this year Gun Bow had finished behind Mongo (at Bowie, Aqueduct and Monmouth). He more than made up for those losses at Saratoga as he won the Whitney Stakes from Mongo by 10 lengths in near track-record time for the mile and an eighth. Watching him cross the finish line still full of run, Trainer Max Hirsch was moved to remark, "This is one of the most brilliant horses I have ever seen." Olin Gentry, manager of John Galbreath's Darby Dan Farm, added, "Only Citation himself could have given Gun Bow a race today."

While Gun Bow was flirting with track records and winning his sixth start of 11 races this year for Trainer Eddie Neloy, he was also making news on the financial front. A son of Gun Shot (himself a son of Hyperion, who broke down before he could prove his potential) out of an undistinguished War Admiral mare named Ribbons and Bows, Gun Bow had begun life as just another foal on the farm of his breeder, Mrs. Elizabeth Arden Graham. After the Whitney he was sold for $1 million, a transaction which immediately elevated him to a very select group. John Galbreath bought Swaps from Rex Ellsworth for $2 million, and back in 1955 a syndicate headed by the Kentucky breeder Leslie Combs II bought Nashua from the estate of young Bill Woodward for $1,251,200.

Syndicates made up of wealthy owners and breeders figure prominently these days in the purchase of horses for breeding (SI, Sept. 29, 1958), but little has been done about syndicating horses of racing age who are capable of winning purse money for their new owners as well as money from future breeding ventures. "It makes perfectly good sense," says another Kentucky breeder, Warner L. Jones Jr., "to have a group of people participate in a horse's racetrack winnings and share in his expenses."

Only a few weeks before, Jones sold the only Bold Ruler colt who will go on the auction block this year to Mrs. Harry W. Morrison for a world-record price of $170,000 and promptly helped her form a syndicate ownership.

The man behind the Gun Bow syndicate is 36-year-old John R. Gaines, a former upstate New Yorker who now operates Gainesway Farm, adjoining Calumet Farm in Lexington, Ky. Gaines first got into the stallion business when Fred Hooper persuaded him to syndicate Hooper's gallant Crozier for $800,000. With Warner Jones's assistance, he has now done the same for Gun Bow.

While John Gaines was picking up his Thoroughbred savvy, Gun Bow was being shuffled from one Elizabeth Arden trainer to the next as the stable made frequent changes. "I think a bad leg kept him out of racing entirely in his 2-year-old year," said one of the training alumni. "Last year, at 3, he showed a world of speed, but they managed to mess him up somehow, and he never really got going." The record shows that Gun Bow ran 18 times in 1963. He won six races and $41,292. Nobody ran through the tunnels of Aqueduct shouting, "A new Man o' War has arrived."

Since 1963 was also a year in which Mrs. Graham's Maine Chance Farm was forced to show a profit for income tax purposes, Gun Bow was picked as something that had to go. Recently when she was asked who—or how many—had trained Gun Bow, she replied wistfully, "Heavens, I don't know who trained him, but the man certainly couldn't have been very good, could he?"

Gun Bow and his stablemate Gun Boat, then a promising 2-year-old, were sold in a package deal for $125,000 to New York Attorney Harry P. Albert and a Sea Girt, N.J. widow, Mrs. John T. Stanley, who race as the Gedney Farm.

Everybody is happy with Gun Bow now, including Mrs. Graham, who last week cheerfully and graciously bought a one-tenth share in the syndicate for $100,000. Especially happy is Trainer Neloy. "This horse has all the potential in the world," says Neloy. "He's an eye-catcher to look at, about 16 hands tall, and I'd say about 1,080 pounds. He girths exceptionally big, which is where he gets his tremendous lung power. He was bruised in midseason, and we were forced to let up on him. But the Whitney was his best race. Carrying 130 pounds, he outsprinted the sprinters and still had enough left to beat Mongo."

The deal for $1 million which followed Gun Bow's latest victory (he has now won $371,120 for the Gedney Farm co-owners) makes sense not only to Mrs. Stanley and Harry Albert, who keep four of the 10 shares, but to each of the six new one-tenth owners—John Gaines, Warner Jones, Elizabeth Arden Graham, C. V. Whitney, Mrs. John Thouron and a partnership of Leslie Combs II and John W. Hanes.

The key to the ownership of valuable horseflesh is the method and rate at which the purchaser can depreciate it. Normally racehorses can be depreciated over five years, or from the age of 2, when they are eligible to earn money, through their 6-year-old year. If, as a new owner, you follow this tax depreciation schedule, you write off 20% of your purchase price for each of those productive years. When you depreciate a horse bought for stud purposes only, you have to spread your depreciation out until your stallion is 16 years old, or, in the case of broodmares, until they become 14.

When you purchase a racehorse at 4, as Gun Bow is, you would be allowed to fully depreciate him as a racehorse in three years, i.e., at the rate of 33‚Öì%. Because Gun Bow will only be racing for the syndicate for one-third of this season, the new owners can only take one-third of that 33‚Öì% now, but they get the full 33‚Öì% for 1965. Then, since it is the intention of Syndicate Manager Gaines to quit racing Gun Bow at the end of his fifth year and stand him alongside Crozier at Gainesway Farm in 1966, stud rates will apply in the write-off for the next 11 years.

As precise and clear-cut as this formula may seem, the figures and circumstances on any major purchase are seldom parallel, and the U.S. never ceases to take an interest in each transaction. The most celebrated example is that of the Nashua sale. The Nashua syndicate rightly contended it had bought Nashua for racing purposes as well as for breeding purposes. The tax people took the position that the famous horse had been bought primarily for breeding, and that therefore the syndicate should not be eligible for the more advantageous depreciation rates which apply to horses still racing. The syndicate proved its point when Nashua won over $300,000 in purses as a 4-year-old.

If Nashua had earned little or nothing that season, the Government might have claimed that the syndicate was racing him solely for quick depreciation purposes. Nashua got his owners off the hook with one final winning year, and now Gun Bow will have a year and four months in which to do the same.

"If Gun Bow is half as good as Kelso for half as long we'll all be happy," said John Gaines to Kelso's trainer last week. Carl Hanford, who now knows a great horse from a good one, replied thoughtfully, "I really believe Gun Bow will be a great horse."




ELIZABETH ARDEN GRAHAM sold Gun Bow, gamely bought back in for $100,000.