Tax question

allenslabs · #1 05/01/05, 01:26 PM

We are thinking of selling our beef cows and just keeping the 2 dairy cows. We are wanting to use the one to raise calves on (she ain't due till 1-20-06) and the other one also but I'll have to milk her out. So these guys will not just be family cows they will be making us $. Can I still claim all my farm stuff on my taxes the same as I do w/ the 5 black cows we have now? We get a lot back on taxes from those 5 cows but we spend out a lot also so it's about even I think. Anyway..... what's your thoughts/?

Ken Scharabok · #2 05/02/05, 04:53 AM

You really need to talk to a knowledgeable tax consultant. My guess would be you can only claim those expenses related to the income aspect. For example, as expenses against the calves raised for resale a portion of the feed, etc. When you get into dual usage, both personal and business, it complicates things. Like a vehicle used for both. Here I claim fuel, but no depreciation, etc. on my dual-use pickup, but do depreciate the flatbed truck as it is predominately used for farm-related activities.

PezzoNovante · #3 05/02/05, 09:48 PM

Quote:

Originally Posted by allenslabs

We are thinking of selling our beef cows and just keeping the 2 dairy cows. We are wanting to use the one to raise calves on (she ain't due till 1-20-06) and the other one also but I'll have to milk her out. So these guys will not just be family cows they will be making us $. Can I still claim all my farm stuff on my taxes the same as I do w/ the 5 black cows we have now? We get a lot back on taxes from those 5 cows but we spend out a lot also so it's about even I think. Anyway..... what's your thoughts/?

Keep accurate records of both personal and business expenses. I suggest you purchase supplies for the income herd separately from the supplies used for personal use. Even if you buy at the same time, like feed, pay for them separately. Prorate other costs -- fuel, repairs, etc -- consistantly. If you are depreciating a building you will have to pro-rate that also. Uniquely identifying the herd also is a good idea and keep records of expenses by the head. (Treated steer tagged 12-48 for worms, Apr 2, 2005 $23.50.)
Write a simple business plan and keep it updated with the objectives stated and recordning things you've changed to increase your profit.

allenslabs · #4 05/02/05, 09:51 PM

I talked to my tax lady today and she said that was fine as long as I was in it to make a profit. Not just goofing off. She said that as long as I was in the business OF.... raising calves.... or goats or whatever..... something that was a business and to make a profit..... I could claim it and all it entailed. Just keep track.

Ken Scharabok · #5 05/02/05, 11:33 PM

I am skeptical of your tax person's advise on all being deductible expenses. Like a home office. If it is also used for other activities it cannot be deducted 100%, but must be prorated. When she signs off on your tax return, make sure the arrangement is she will represent you during an audit free of charge and she is responsible for any additional taxes/penalities which result from your following her advise. Make her put her time/effort and wallet where her mouth is so to speak.

Ken Scharabok

Debbie at Bount · #6 05/03/05, 07:30 AM

I agree with Ken on the tax stuff. Also, depreciation of bldg doesn't mean you'll never get caught. I depeciate a guess house on my property that I use for a home business. The barn is depreciated too. All things on this ranch are but....when and if I ever sell and it went up in value I would pay from the depreciated amount to the sell amount.

An example, we once had a rental that we depreciated every year in a depressed area so...it never went up in value. Sold 11 years later for the price we bought that rental for and had to pay tons of taxes because we had depreciated it so much! I didnt call that a great investment!!!!

Debbie

myersfarm · #7 05/04/05, 09:39 AM

allen get what i have a tax man that is also a cattle farmer.......you can take almost everthing off you taxes as a expense......but as your tax man said you still need to make a profit so it doesn't fall into the hobby catagory.........i put everything on a creidt card so i have a better record then pay off every month.....like my fuel for the farm if you but fuel like $100 month for the farm it is easy to track that when you spend $200 a month that something affected that .....if you went on a buisness trip ....write it down .......as farm expense .....if you happen to go on vacation...then write that down also just make sure you did on the way stop and look at a milk cow for sale .....and write that down.... who.... when ....were..... then it becames a buisness trip..but no matter what the expense is your little farm has to cover that expense to make a profit......you can also over lap years to help you ......one year spend money like crazy on stuff you need then next year spend only what you have to have...so all the expense will be in one year and then next year very little....ever hear of prepaid fuel......you do not need to keep up with the shots on cows......you do need to tag cows and keep track how much and when bought...i deprecate.....EVERYTHING....then its deprecation not a expense that you have to cover.......my cows , hammer ,truck , fence , cow milker,anything that goes down invalue john

myersfarm · #8 05/04/05, 09:57 AM

yes i know the dual purpose stuff can get you in alot trouble so very simple....do not do it..if you need a office for farm built one and only use for the farm......here i have never heard of a tax man that will not go when you get audited...thats part of there job why i pay him....worth ever dollor btw thats also a expense every one can claim ...so...just make sure you have enough cows to file as a farm there is a number you do have to have i think it is 3 cows but not sure...way taxes are EVERYBODY NEEDS A FARM....btw i have 80 head angus and 16 jerseys...buy and sell thought out the year,,,its easy for me to buy stuff on expenses one year and not sell calfs....then next year sell two years of calfs like in january the year before calfs fall into the year you sell and have very little expenses the next year that way i am sure to make a profit......,one thing that is also funny since i use my computer for this stuff and the stock market and do not play games or anything else the computer is on deprication also john

unioncreek · #9 05/04/05, 01:05 PM

My accountant told me not to even tell him if I raise cattle and hogs to sell to private individuals. But, if I take them to a sales ring I would need to claim it, because they can trace the check. I make way more by not claiming any income from my livestock. If you make more than around $400 you have to start paying self employment taxes.

Bobg

Ken Scharabok · #10 05/05/05, 02:56 AM

The tax codes are so complex even skilled professionals cannot submit a perfect tax return unless it is very, very simple. I remember reading somewhere of tests in which the same set of data was submitted to a bunch of CPAs and no two final tax numbers agreed, which a fairly wide variance. I also remember reading of a text where the tax return of tax professionals were audited and every single one contained one or more mistakes.

A tax preparer is about like Sears tools. The tools themselves have no real value over others, it is the replacement guarantee which makes them sell higher. With a tax professional you are, in effect, buying a guarantee to represent you in an audit. They may or may not pay any penalties or interest from it.

With Internet tax advise, it is worth what you pay for it.

Ken Scharabok