As I put in my prior post, it would be extremely agressive to try the LTG route and does not fit the real intent of a LTG. It was a somewhat sarcastic remark that since you put years of work into the dog, then the gain should be treated as a LTG. The IRS would not share this view since you didn't directly invest money and were expecting the gain later.
A gift to an individual is definitely a taxable situation. If you gave your pro the money as a gift, you have to pay his tax on the money as well for over the limit. Now you are paying tax twice on some of the winnings. (The limit has been increased since I took the CPA exam to $12,000 per year. It used to be $10,000)
Here is the Gift Tax blurb from the IRS website.
"IRS Tax Tip 2007-39
If you gave any one person gifts in 2006 that valued at more than $12,000, you must report the total gifts to the Internal Revenue Service and may have to pay tax on the gifts.
The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value.
Gifts include money and property, including the use of property without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift."