Rev. Rul. 73-232

Advice has been requested whether race tracks that make payments to "free lance" jockeys under the circumstances described below should make information returns on Forms 1096, Annual Summary and Transmittal of U.S. Information Returns, and 1099-MISC, Statement for Recipients of Miscellaneous Income.

Under the system of accounts used by certain race tracks, a race track's employee (called a "horsemen's bookkeeper") has the responsibility for handling deposits of the horse owner (called a "horseman") in a special race track account described as a "Horsemen's Account" or "Horsemen's Escrow". This bookkeeper is responsible for depositing in the special track account any earnings paid by the track to the horsemen. Disbursements are made from the special track account by the horsemen's bookkeeper only as authorized by the horseman, who designates the bookkeeper as his agent in writing. From the funds deposited to the credit of the horseman, the horsemen's bookkeeper pays in the horseman's behalf, certain operating expenses such as payments to "free-lance" jockeys who are not employees of the horsemen. See Rev. Rul. 70-572, 1970-2 C.B. 221. The special track account may be closed at any time at the direction of the horseman whose funds are deposited. Generally, the funds remaining in the account at the end of the meet are transferred to the horsemen's account at another track.

The horsemen's bookkeeper maintains an account card for each jockey engaged in business at such track. These cards are complete records of the date the jockey rode, the mount fee paid to him, and the total credit to him for each date he was employed. The horsemen's bookkeeper makes an offsetting charge to the horsemen's account for each fee credited to the jockey's account card. The balance on the account card also reflects entries by the bookkeeper for charges against the jockey for guild fees and valet charges paid for him by the bookkeeper. The balance in the account is payable on demand to the jockey. All payments made to the jockey or in his behalf are made by the horsemen's bookkeeper from funds in the horsemen's account of the track.

Section 1.6041-1(a)(1) of the Income Tax Regulations provides that every person engaged in a trade or business shall make an information return for each calendar year with respect to payments made by him during the calendar year in the course of his trade or business to another person of fixed or determinable salaries, wages, commissions, fees, and other forms of compensation for services rendered aggregating $600 or more.

Section 1.6041-1(f) of the regulations provides that for purposes of a return of information, an amount is deemed to have been paid when it is credited or set apart to a person without any substantial limitation or restriction as to the time or manner of payment or condition upon which payment is to be made, and is made available to him so that it may be drawn at any time, and its receipt brought within his own control and disposition.

Race tracks maintaining a system of paying "free-lance" jockeys in the manner described above are operating as fiscal paying agents for the horsemen (horse owners) whose funds are used to pay the jockeys.

Accordingly, it is held that the race tracks are responsible for filing information returns on Forms 1096 and 1099-MISC for payments aggregating $600 or more in any calendar year made by them to such jockeys.

Compare Revenue Ruling 70-573, 1970-2 C.B. 221, which holds that a jockey engaged under contract by a race horse owner who requires him to report for duty when needed and who directs and controls him is an employee of the owner.