Answer
This gives rise to the age-old tax question ¾ is your client in business or is he merely carrying on a hobby, albeit an apparently lucrative one?

Factors which point towards the running of a business include a genuine profit-making intention (compared with the mere prospect of profit) and a sufficient level of activity associated with that intention. Other considerations are the nature of the activity; the length of time the activity is conducted; the scale of the operation and the volume of transactions; the commitment of time, money and effort and the pattern of activity; and the financial results.

In your client's case, you must consider the proportion that his horse-breeding activities bear to his overall farming activities.

If someone were to ask your client, "What business are you in?", you should consider what his response would be ¾ "I'm a farmer" or "I'm a horse trainer." The answer will go some way to establishing whether or not his horse-training and horse-breeding activities are just a hobby.

Regarding the stake money, note that racing prize money is exempt from tax.

On the subject of the offer to purchase the stallion, if your client were to accept the offer, the proceeds would be taxable if your client's dominant intention when purchasing that stallion had been to make a profit from a subsequent sale. This would be unlikely if the stallion was bought to further his hobby of breeding horses.