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House Committee Rescinds Its Action On Proposed Change in Tax Deductions Breeders and Owners Would4 Have Been Dealt Crippling Blow Under Original Plans WASHINGTON, D. C, May 25.— The House Ways and Means Committee, which is considering tax legislation, has reversed itself on its proposal to disallow deductions from gross income of losses sustained in so-called "hobby" or "luxury" activities. As reported in the Congressional Record, the committee "reconsidered tentative action •of May 3, 1951, making subject to disallowance deductions for business losses where they aggregate 0,000 in a five-year period, and exceed gross income from the business in three or more of the five years, and rescinded the tentative action." The committee estimated that adoption of its earlier proposal would have yielded 5,000,000 in additional revenue. Originally, the decision of the Ways and Means Committee was as follows: • "To disallow business deductions to the extent that they exceed gross income from an enterprise unless the taxpayer can establish by a clear preponderance of evidence that the business was conducted primarily for profit and not for personal ► , . . gratification, where the taxpayer has carried on business for five years with an aggregate net loss for the five-year period of more than 0,000, if the expenses attributable to such business exceeded the gross income therefrom in three or more of the five years, for each of these five years and for the current year." While they were not specifically referred to, application of the original proposal, if it were included in the new tax laws, would have dealt a crippling blow to breeders of thoroughbred horses and owners of racing stables. When the import of it was realized, breeders of thoroughbreds, particularly in the Blue Grass belt of Kentucky, breeding associations and other organizations throughout the country engaged in the production or racing of horses, protested vigorously to the individual members of the Ways and Means Committee as well as to their respective congressmen. It was pointed out that a wide circle of people, other than those engaged directly in the breeding industry, would be hard hit. It was held that the loss in taxes due to curtailed income would far exceed any revenue that the Ways and Means Committees proposal was calculated to yield.
