April  2000

Joint Supplements

A host of supplements are available on the
market today that have demonstrated health
benefits to horses.

by HEATHER THOMAS

    There are many supplements available, with many purposes. Some vitamin supplements are given to aid hoof growth, for instance, and other types of supplements give older horses more of the micro-nutrients they have trouble absorbing (elderly horses often have less efficient digestive tracts than younger horses).
    A number of new supplements called nutraceuticals, are becoming popular and some of these are aimed at keeping joints healthy or helping diseased joints remain functional and less painful. A few examples of oral products aimed at joint therapy are methylsulfonylmethane (MSM), glycosaminuglycan (GAG), and glucosamine.
    Nutraceuticals are a controversial type of supplement, and in a class by themselves, categorized as neither a feed nor a drug, but something in between-a "natural health" product designed to be given orally. According to the North American Veterinary Nutraceuticals Council (a recently formed trade association representing manufacturers of these products, and some veterinary and pharmacology specialists), nutraceuticals are substances "produced in a purified or extracted form and administered orally to patients to provide agents required for normal body structure and function, and administered with the intent of improving the health and well being of animals." These feed additives are also described as non-toxic food components that have demonstrated health benefits to horses.
    Sprinkled on feed or given orally as pills or paste, nutraceuticals are presently being used to treat a wide assortment of disorders. These substances have a high safety threshold when taken internally, and are not designated as drugs by the FDA or any other governmental regulatory agencies, so they can be marketed without veterinary supervision. Yet because of their effects, several equine sport groups have banned the use of several nutraceutical products during competition. There's no test available to check a horse for these compounds, however, since they occur naturally in the body.
    Since nutraceuticals are not regulated by governmental controls, manufacturers of these products are not required by law to guarantee the amount of each ingredient listed nor describe the action of the product, and the "effective" dosage for horses has not yet been determined. Labels and advertising are often a bit vague. Very little equine research has been done on the effects and benefits of these products, so the horseman has to rely upon the research that has been done on humans or on the claims by other horsemen, trainers and veterinarians who have used the products and who feel that they help.
    MSM: Methylsulfonylmethane is the nutraceutical that has probably been used the longest for joint therapy in horses; some horsemen began using it about 20 years ago. MSM is a white crystalline powder, an organic compound derived from DMSO (dimethyl sulfoxide). DMSO is a topical anti-inflammatory agent originally produced as a by-product of the wood-pulp paper industry. MSM appears naturally in the bloodstream in very small amounts, and in milk, vegetables, fruits and grain.
    MSM provides a dietary source of bio-available sulfur, an element that is essential to the formation of connective tissue, along with having several other important roles in the body (stimulating hair, skin and hoof growth, and the production of enzymes, hormones and immunoglobulins, for instance). In nature, however, sulfur is a fragile and elusive element and many animals (and humans) are deficient in this vital mico-nutrient. Though it is naturally present in many fresh feeds such as pasture grass, it tends to disappear with processing-even just the cutting and drying of hay. Adult horses fed mostly processed hay and grain are often sulfur-deficient. Foals usually get plenty of this nutrient because mare's milk is rich in sulfur; the mare puts much of her own body's supply into the milk. If she is on hay and grain rather than paste, her supplies may be depleted while she is lactating.
    Some researchers feel that the primary benefits of MSM as a supplement are the result of its restoring the proper sulfur level in the body. It can also help relieve the pain of arthritis, often better than traditional medications such as phenylbutazone. The veterinarian who did the earliest research on MSM in the 1970's, Dr. John Metcalf of Vancouver, Washington, stated that it basically does two things in the body-enhances circulation and reduces inflammation-and both of these factors can be beneficial for injured or diseased joints. The advantage of using MSM rather than a topical anti-inflammatory medication is that it goes through the body and treats the problem from the inside. Its parent product, DMSO, is generally used as a topical treatment to reduce swelling and inflammation, while MSM is used as a feed supplement, to treat the animal systemically.
    GLYCOSAMINOGLYCAN (GAG): This nutraceutical is a natural joint lubricant. Injectable forms of synthetic GAGs (polysulfated glycosaminoglycans-PSGAGs) have been used for a number of years to treat joint disease in horses (two of the most commonly used injectables are sodium hyaluronate-hyaluronic acid-and Adequan), and in recent years oral products have become popular for treating arthritis in animals and humans. GAGs seem to slow down the degenerative process in the joint as well as relieving the inflammation. GAGs are used by some horsemen in granular form as a feed additive to help the body repair the normal wear and tear on cartilage in joints, and to prevent inflammation in connective tissue disease. The bone ends that come together in a joint are covered with cartilage, which when healthy and resilient acts as a buffer so that the bones never grind upon one another.
    Chondroitin sulfate (a component of cartilage, skin, vertebral discs and other body tissues) belongs to the GAG family of natural joint lubricants, and is thought to keep cartilage spongy and healthy by attracting fluid into it. Chondroitin sulfate is produced in the cartilage by chondrocytes. The large structure of its long-chain molecules helps bind the collagen fibers together in the cartilage and also seems to help protect the cartilage from destructive enzymes.
    Degenerative joint disease (cartilage breakdown, leading to arthritis and lameness) can often be halted or slowed by giving the body more of the raw materials needed for repairing the damage. There are many "chondro-protective" joint supplements available today for arthritic horses, and all of them attempt to provide the body with the basic materials to create healthy cartilage. This bone-cushioning material (the cartilage matrix) is composed of collagen fibers, GAGs (creating the structural framework and giving some elasticity to it) and sodium hyaluronate-the thick gel that lubricates and cushions the joints.
The chondroitin sulfate (an organic source of GAGs) included in many supplements aimed at joint health is thought to increase the viscosity of joint fluid, adding more cushions and lubrication so the bones won't grind on one another; damaged cartilage that leaves bones without a buffer when they move upon one another is the primary cause of joint pain and inflammation. This GAG is also thought to inhibit some of the enzyme action that "eats" cartilage and speeds up the degenerative process. The primary sources of chondroitin sulfate for these supplements are shark cartilage and the tracheal and nasal cartilage obtained from cattle at slaughter.
    Glucosamine is one of the building blocks for chondroitin sulfate, and is part of the chemical that gives synovial fluid (the lubricant in the joint) its resilience and elasticity. Hailed as a wonder drug a few years ago, glucosamine is being used by an ever increasing number of horsemen as a natural alternative to steroids and nonsteroidal anti-inflammatory drugs in treating degenerative joint disease. It is extracted from chitin, a compound found in the shells of shrimp and crabs, and since by itself it is relatively unstable, glucosamine is commercially formulated as a salt-a white powder that resembles a non-dairy coffee creamer.
    Glucosamine is thought to stimulate the production of GAGs in cartilage and increase the rate of chondroitin sulfate utilization. The glucosamine molecule was first discovered in the early 1960's by researchers in Italy who then patented a product for treating osteoarthritis in humans. Being a smaller and simpler molecule than the more complex chondroitin, glucosamine is thought to be more easily absorbed by the digestive tract.
    In 1994 Nutramax Laboratories patented a mixture of chondroitin sulfate and glucosamine hydrochloride with manganese (trade name Cosequin, for veterinary purposes, and Cosamine DS for humans), claiming that the two compounds work better together than separately.
    HOW WELL DO THESE JOINT SUPPLEMENTS WORK? There is as yet no significant documented research to prove how well these joint supplements work in horses, however. Research has been done in humans, dogs and cats, and in laboratory rates, but at this point the equine market for nutraceuticals has been too small to justify extensive clinical trials. The effectiveness of joint supplements in horses must be guessed at from work done in other species, and this is truly just a guess, since the horse's digestive tract (and ability to absorb these products) is vastly different from that of a person, a dog or cat or a research rat. The horse may not absorb chondroitin sulfate or glucosamine the same way. One researcher has been able to detect elevated blood serum levels of these compounds in dogs and humans, but not in horses or rabbits, perhaps because the latter are vegetarians and the chondroitin or glucosamine may be converted or eliminated more quickly.
    The bottom line, however, is that these joint supplements do seem to help horses, even though their action in the body is still unclear. They are also relatively safe and harmless, with no known side effects (which cannot be said of steroids, which hinder the immune system, or nonsteroidal anti-inflammatory drugs which can lead to digestive tract ulcers and also inhibit cartilage metabolism). The nutraceutical joint supplements can safely be used with injectable GAGs and with traditional pain relievers.
    The downside of these products, however, is their high cost, and the lack of quality control. A study by the University of Maryland School of Pharmacology a few years ago found that 70 percent of the nutraceuticals they tested did not contain the listed ingredients in the amounts printed on the labels. These and other questions led one manufacturer (Nutramax) to create the North American Nutraceutical Council in 1996, headed by Dawn Booth, PhD, DVM (Texas A&M, Department of Veterinary Physiology and Pharmacology). The purpose of the council is to establish standards for the production and marketing of nutraceuticals and to look into the medical claims, product labeling and product reviews. The group hopes to award their "seal of approval" to the products that comply with their standards, to help horsemen shop wisely amongst the wide array of joint therapy products and "natural" remedies now on the market.



Business or Hobby-IRS Guidelines Help

by PATRICK HURLEY

    Horse owners, whether their involvement is because of their love of the sport or purely for investment purposes, must be aware of the federal tax laws. The cost of owning a horse is such that it is nearly impossible to be part of the equine industry unless it is done as a business. Otherwise, during those inevitable loss years, it will not be possible to deduct losses against income from other sources.
    The 1969 Tax Reform Act modified the law on "activities engaged in for profit" and the IRS subsequently issued regulations for assessing when a venture, such as horse racing or breeding, is a business or a hobby. In addition, there have been numerous court decisions which have further defined the lines between a business and participation primarily for pleasure and recreation. Still, many horse owners remain uncertain about the factors involved in being treated as a business.
    Section 183 of the Internal Revenue Code provides that if a horse business engaged in by an individual, partnership or subchapter S corporation shows a profit in two years within a seven year period (beginning with the first profit year), it will be presumed to be engaged in for profit, with a separate special election available for a new enterprise. If the activity is one engaged in for profit, then losses resulting from the business may be deducted from other income.
    However, the two-out-of-seven presumption is not absolute. There is no negative presumption in the rule. Even if an activity does not have two profit years during a seven year period, it is not necessarily a hobby; the burden of proof is merely shifted to the taxpayer to prove he entered into and/or continued the activity with the objective of making a profit.
    Conversely, two profit years occurring during the seven year period do not assure that the IRS will not consider the operation to be a hobby if the profits during those two years are minimal and the losses were substantial.
    The regulations list nine objective factors which will be taken into consideration in determining whether an activity is engaged in for profit. No single factor is controlling, and the IRS and courts do not reach a decision solely by comparing the number of positive factors versus the number of negative factors.
    The following is a brief examination of the nine factors used in determining whether a horse operation is a business or hobby.
    THE MANNER IN WHICH THE TAXPAYER CARRIES ON THE ACTIVITY. Is the venture carried on in a businesslike manner? Are separate and accurate books and records maintained? Are new techniques and methods of operation adopted and unprofitable strategies abandoned?
    The courts have also cited failures to carry on the venture in a business-like manner in determining a horse operation to be a hobby. Sound business practices, having a plan to guide business decisions toward a profitable operation and modifying methods of carrying on the operation which have not been successful are key elements for the courts in deciding hobby loss cases.
    THE EXPERTISE OF THE TAXPAYER OR HIS ADVISORS. The horseman's knowledge or effort to learn how to manage a successful enterprise has been considered by the courts in several Section 183 cases. For example, if the taxpayer intends to sell some or all of the horses he owns, a knowledge of the potential market and the selection of bloodlines which should appeal to the market will be considered a positive factor in the taxpayer's favor.
    THE TIME AND EFFORT EXPENDED BY THE TAXPAYER IN CARRYING ON THE ACTIVITY. The time devoted to the horse activity, either in planning and supervising it or in performing labor connected with the operation of a horse business, is an important consideration in determining whether it is a business or a hobby. If the taxpayer devotes considerable time to the venture, including partial or total withdrawal from another occupation, this will be considered evidence that the business is one engaged in profit. If there is no substantial time devoted by the taxpayer but he employs qualified people to run it for him, the lack of time he spends on it will not necessarily indicate the lack of profit objective.
    EXPECTATION THAT THE ASSETS USED IN ACTIVITY WILL INCREASE IN VALUE. This factor has not been a major element in previous court decisions, but the expectation of appreciation of assets in establishing a plan for profitable operation of a horse business can be important in proving a profit motive. Such assets obviously include the horse owned by the taxpayer, but can also include real estate or other assets of the business.
    This factor may be of special importance to a new business. It is reasonable to expect losses in the early years of a horse activity, but the taxpayer can demonstrate an objective of making a profit through the development of winners or through the purchase of quality breeding stock.
    The appreciation on one major stakes winner can compensate for several years of losses incurred while seeking that top quality horse.
    THE SUCCESS OF THE TAXPAYER IN OTHER ACTIVITIES. If the taxpayer has a history of turning unprofitable activities into money-making enterprises, this is evidence that current losses in a horse venture may eventually result in future profits. However, this factor has not been considered by the courts in recent hobby loss cases.
    THE TAXPAYER'S HISTORY OF INCOME OR LOSSES IN THIS ACTIVITY. The profitable operation of a horse activity obviously is sound evidence that it is engaged in for profit, but the reverse is not necessarily true. Losses during the first years of a horse enterprise are not unusual and may not be an indication it is not engaged in for profit.
    If the losses continue well beyond the early years, this can be evidence that it is not an activity engaged in for profit. However, this is not necessarily a controlling factor. The taxpayer may be able to demonstrate mitigating circumstances which have caused the continued losses. For example, the accidental death of one or more horses which had demonstrated potential between a profitable undertaking and continued losses.
    To the extent such events have caused what appeared to be a successful plan of operation to go awry, the courts have considered them important in determining whether a horse venture was a business or a hobby. For that reason, good records again are emphasized.
    Being able to show the dates and effects of disease, accident or other setbacks can confirm the profit potential which was present before the unforeseen event occurred.
    THE AMOUNT OF OCCASIONAL PROFITS, IF ANY, WHICH ARE EARNED. As mentioned earlier, achieving two profit years during a seven year period will not necessarily assure that an activity will be judged to be engaged in for profit. If the two profit years are small in comparison to the amount of losses in other years, or in relation to the size of the taxpayer's investment, the IRS and the courts may still find that the activity was not engaged in for profit.
    The reverse is also true. A substantial profit year in relation to a number of small losses or in relation to the limited investment in the operation would tend to buttress in the taxpayer's position that he was engaged in activity for profit.
    Every horse owner is well aware of the negative economic situation in racing. The costs of maintaining horses in training are far greater than the amount of purse monies available. Due to this experience a loss then will show a profit during any given year.
    This is tolerable to owners because most of them have a desire to be a part of a sport they enjoy and because of the potential for profit which does exist. Like the prospector who spends years searching for gold with little or no success, the horse owner knows all the effort and money invested will be worthwhile if he can strike it rich with one horse. Every owner hopes that he will breed the next champion, and the returns from that mating can offset the expense of the many horses he bred which were slow to get out of their own way.
    This potential is the one element which can overcome the loss years and the minimal profits, and the courts have generally recognized this fact. If the operation meets the other tests mentioned, this factor may be of only minor importance.
    THE FINANCIAL STATUS OF THE TAXPAYER. According to the regulations, the lack of substantial income from other sources will be in our favor in determining whether your horse operation is a business or a hobby. On the other hand, a large income from other sources may weigh against you. The degree of personal pleasure or recreation you derive from owning horses and the fact that the losses from your horses create substantial tax benefits will be taken into consideration in weighing this factor.
    Some IRS agents seem to place considerable emphasis on this factor. To these agents large income or capital seems to be akin to waving a red flag in front of a bull. Fortunately, the courts generally do not share the IRS view. As an example, one court noted the taxpayer ". . .surely could have found a venture far less demanding of his physical and financial energies in which to "shelter" a portion of his income."
    ELEMENTS OF PERSONAL PLEASURE OR RECREATION. The regulations not that the personal motives may indicate the activity was not engaged in for profit, particularly if it provides recreation or pleasure for the taxpayer. This does not mean the taxpayer should not enjoy the activity, but the motive for carrying on the enterprise must include an objective of making a profit. So long as the other factors indicate a profit motive, personal pleasure will not cause the activity to be classified as a hobby. However, if the previous factors do not clearly substantiate a profit motive and the taxpayer or his family clearly derive enjoyment from the horse operation, this could weigh as a negative factor.
    In a 1977 case, the Tax Court ruling turned on this issue. The court noted the taxpayer activities might be consistent with a profit motive, but the taxpayer had failed to prove they were other than purely recreational in nature.
    SUMMARY. It should be emphasized that the IRS does not add up the number of positive and negative factors and base its decision on a mathematical result. In addition, the courts appear to have placed greater emphasis on some of the factors than they have on others.
    Most experts have concluded that one of the most crucial elements is the manner in which the taxpayer carries on the activity. The failure to maintain adequate, accurate books and records has been the key to several rulings that a horse activity was a hobby. Further, the lack of these records will make the task of reaching a positive conclusion on other factors more difficult. While good records alone will not insure the activity is engaged in for profit, the absence greatly increases the chance that the operation will be judged a hobby.
    As with all tax issues, the facts and circumstances of each individual operation must be considered and the horseman should consult their tax accountant or an accountant familiar with horse racing, breeding and showing operations for advice and specific situations. Specific questions regarding this article should be addressed to Patrick J. Hurley at (800) 996-1040.

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