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☛ Legal implications regarding 1099s



Sept. 2, 2012
Glory Ann,
Heretofore, you have had commentaries from two purported attorneys representing two separate Cutting Horse Organizations offering conjectural opinions on the actual
powers endowed to a Horse Trainer in representing the horse owner in his/her absence. In fact, same represents Horse Trainers are empowered with actual implied
and automatic authority to act as an actual legal Agent for such horse owners(s) by virtue of their trade name, e.g., Horse Trainer.

For the Record, each purported attorney suggests a Horse Trainer is cloaked with absolute authority to legally act in the owner(s) behalf in each ones absence. Therefore, it should be noted the actual definition of (AGENT) in commercial business is defined as follows:  With specificity, (“AGENT IN LAW) – In commercial law, is a person authorized to act on the behalf of another, (called the principal), to create a legal relationship with a third party.

In the absence of a fully executed POWER OF ATTORNEY specifically authorizing the above, by legal definition, a Horse Trainers actual authority is limited in scope of authority by virtue of this definition and absence of the executed legal document between the party(s).

Also, For the Record, please be advised of the following:  More specifically, when a corporation operates and continues to operate under a same set of guidelines a (SET PRECEDENT) is established, i.e., by definition (“Something done or said that may serve as an example or rule to authorize or justify a subsequent act of the same or analogous kind.”).

Therefore, if it’s an established business practice for such horse organization to operate in such a repetitive  manner, quite simply a precedent is established by operating in the same and usual customary business manner, e.g., providing horse owners earnings checks in the name of the Horse Trainer and not the owner(s).  Each purported attorney represents this is the usual and customary business practice of each separate horse organization named therein.  Thus, (A SET PRECEDENT) of a usual and customary business practice has been established by each entity.

Effectually, such a precedent could be argued the horse organization utilizing (A SET PRECEDENT) in its normal course of business, I.e., providing owner checks to Horse Trainers, is also establishing another set (SET PRECEDENT)  which would endow
and designate, by such set precedent, the Horse Trainer as (NOMINEE/MIDDLEMAN) for the horse owner(s) thus enacting the established IRS 1099 reporting doctrine set
forth in the IRS (nominee/middleman) provision of the federal tax code FOR REPORTING EARNED INCOME.

As the IRS TAX CODE STATES – Each nominee/middleman must register with the IRS as well as providing the name and tax identification for each owner named therein.
Click for IRS 1099 tax law>>

Essentially, this requires the Horse Trainer or (nominee/middleman) to be in possession of all relevant tax identification information relative to each owner(s) to include, but not limited to name, address, social security number or tax identification number, W4 information, etc.  actually, this horse trainer is in possession of the most private and guarded information available for an individual.

My question is, where’s the security to insure safe keeping and prevention of identify theft.  Is it in his/her barn for ease of access by anyone or in a file cabinet in his residence which also offers ease of access.  We all know horse training facilities, especially, in the border states are subject to being infiltrated by illegals and other transients.

Thus, it’s argued that a corporation utilizing such an unorthodox accounting method is virtually guaranteeing the absolute security of owner tax information, all rules of the Federal Tax Code 1099 reporting requirements, as same applies to reportable income, will be adhered to by its utilization of the (nominee/middleman), i.e. Horse Trainer/Horse Owner(s) check issuance, and the rightful and legal owner of such funds will receive full ownership of same from the (nominee/middleman) or Horse Trainer, as well as the Horse Trainer is legally in the U.S.

Notwithstanding, such an unorthodox accounting method subjects the horse owner(s) with the liability of the Horse Trainer complying with all Federal and State tax laws and that such individuals accounting records are legal, accurate, up to date and legally filed on an annual basis.

A non-profit corporation is compelled to operate within the full and absolute letter of the laws of the state it’s organized in, as well as the United States Criminal/Civil Code or in certain circumstances of impropriety the Officers and Directors of same are open to culpable liability and the protective veil of the corporation can be pierced.

Further, it’s not out of the realm of possibility when improprieties are found for a 501c  Corporation to lose its coveted nonprofit status.  As previously stated, and
as a Risk Analysis Expert, it’s incumbent on and advantageous for corporations to perform a Risk Analysis and a Forensic Audit to insure complete legal compliance of daily business practices, as well as insuring complete transparency. Transparency is especially essential with non-profit organizations.

For simplicity, accuracy legality and security my posture remains the same. Horse Earnings Checks should be issued directly from the Horse Organization (PAYER) to the rightful and legal owner (HORSE OWNER(S).  The horse owner can then issue the Horse Trainers portion of such earnings and this accounting method keeps the accounting records clean, accurate and legal.

In closing, perhaps both purported attorneys, as well as each Horse Organization should rethink their opinions and established (SET PRECEDENT) business practices.

Submitted with respect:

Rick Dennis, CPP
Wind River Company L.L.C.
Managing Member

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