Gains from the sale of property that is used in a business, including horses, can qualify for capital gains tax treatment, which means that the tax rate is lower for individuals than the regular personal tax rate. The current capital gains rate is 15%.
   Under the current tax code, the holding period for long-term capital gains treatment on all assets used in a trade or business -- except horses and cattle -- is 12 months. Horses held for breeding, racing, showing, draft or other sporting purposes must be held for at least 24 months to qualify for the present 15% long-term capital gains tax rate.
   The two-year holding period was enacted in 1969 primarily as an anti-tax shelter provision. Since that time, there have been numerous changes in the tax law, in particular the institution of the passive loss limitations, which have virtually put an end to "tax shelters." These changes have greatly reduced the possibility of using the horse business as a tax shelter and make the present differences in the required holding period for horses unnecessary and unfair.
   This issue was considered during the 108th Congress at the urging of Sen. Jim Bunning (R-KY) who introduced a bill to reduce the capital gains holding period for horses to 12 months. He also had this measure included in a broader bill that passed the Senate.
   Sen. Bunning has indicated that he will continue to work to have this change included in other tax bills in this Congress.