$1300! whoa thats a lot of money

[aplusmnt]

One thing I was pondering on this $130.00 per cow cost. Is it possible to have maybe a year that is that low, but if you look back last year or the year before and showed say $500.00 per cow cost because that year you built new fences, or bought new hay rings, troughs, built a corral etc.

Seems it would be important to depreciate this stuff out in a way that gives a person an accurate year to year cost and profit. I could see some saying dang lost big last year went in whole, but last two years been making a killing. When in reality you made a small profit over the three years if charged off the books properly.

Just a thought! Might explain some people having a low spending per cow on a certain year, they were on a down swing of spending? Years in past and years in future will not be so good.

The figures I would like to know is say a person's ten year average of cow cost. That would be a more accurate figure most likely.

Aplus, when doing taxes all cattle bought are depreciated over a certain period of time. H & R Block wanted to depreciate over 7 years for cows and bulls. I had them depeciate for 5 years for cows and 3 years for bulls. Same thing with machinery - depreciated over it's useful life. I bought a Kawasaki mule and it's dep. over 5 years. Tractors, trucks, are the same way. With structures (barns, fences, corrals, etc) the time is normally longer. New fences 10 years, barn 10 years.

This gives you a truer indication of profit/loss, as without some sort of depreciation factored in your profit/loss would be up and down spikes on a chart from year to year.

This does not account for retained heifers (or bulls for that matter). I haven't found a way to depreciate them yet :lol: If you wanted to do it personally, you can add retained cattle to your total.

Cypress......do you have to take a depreciation? In my Janitorial bussiness, there has been times with Vehicles and equipment that I opted to deduct it all off in one year, when I could have depreciated it if I choose to. Curious if that is an option or not?

Example one year you sell every calf on the place but bought a piece of equipment so you deduct the whole price of of taxes for that year. But next year you retain some heifers and have less income, so the equipment you bought that year you depreciate to help on up coming years?

Never dealt with cattle as a business before, but will next year, but in past with Janitor bussiness I have did some of the above type of situations with purchases.

 

[WORANCH]

One thing I was pondering on this $130.00 per cow cost. Is it possible to have maybe a year that is that low, but if you look back last year or the year before and showed say $500.00 per cow cost because that year you built new fences, or bought new hay rings, troughs, built a corral etc.

Seems it would be important to depreciate this stuff out in a way that gives a person an accurate year to year cost and profit. I could see some saying dang lost big last year went in whole, but last two years been making a killing. When in reality you made a small profit over the three years if charged off the books properly.

Just a thought! Might explain some people having a low spending per cow on a certain year, they were on a down swing of spending? Years in past and years in future will not be so good.

The figures I would like to know is say a person's ten year average of cow cost. That would be a more accurate figure most likely.

Aplus, when doing taxes all cattle bought are depreciated over a certain period of time. H & R Block wanted to depreciate over 7 years for cows and bulls. I had them depeciate for 5 years for cows and 3 years for bulls. Same thing with machinery - depreciated over it's useful life. I bought a Kawasaki mule and it's dep. over 5 years. Tractors, trucks, are the same way. With structures (barns, fences, corrals, etc) the time is normally longer. New fences 10 years, barn 10 years.

This gives you a truer indication of profit/loss, as without some sort of depreciation factored in your profit/loss would be up and down spikes on a chart from year to year.

This does not account for retained heifers (or bulls for that matter). I haven't found a way to depreciate them yet :lol: If you wanted to do it personally, you can add retained cattle to your total.

Cypress......do you have to take a depreciation? In my Janitorial bussiness, there has been times with Vehicles and equipment that I opted to deduct it all off in one year, when I could have depreciated it if I choose to. Curious if that is an option or not?

Example one year you sell every calf on the place but bought a piece of equipment so you deduct the whole price of of taxes for that year. But next year you retain some heifers and have less income, so the equipment you bought that year you depreciate to help on up coming years?

Never dealt with cattle as a business before, but will next year, but in past with Janitor bussiness I have did some of the above type of situations with purchases.

Section 179 It will save you money some years

 

[Arnold Ziffle]

Coming late to the discussion, but now that the initial tax filing season has passed I've actually got a little free time, so:

I believe Texan is correct as to the depreciable lives to be used for agricultural assets -- and it does make a difference whether you depreciate under the shorter GDS/MACRS lives versus the longer ADS lives. For a complete listing of depreciable lives for various types of assets (not merely those related to agriculture) see IRS Publication 946. However, for assets commonly used in cattle or crop based ag operations I believe the depreciable lives are:

Breeding or dairy cattle (cows and/or bulls) -- 5 years under GDS/MACRS and 7 years under ADS

Machinery & equipment, fences and grain bins -- 7 years MACRS and 10 years ADS

Farm buildings, other than "single purpose" buildings -- 20 years MACRS and 25 years ADS

Single purpose ag or horticulture related buildings -- 10 years MACRS and 15 years ADS

Land improvements such as drainage systems, roads, bridges -- 15 years MACRS and 20 years ADS

And for those folks that are real traditionalists: Draft horses that are 12 years or less of age when acquired -- 7 years MACRS and 10 years ADS (for older horses the MACRS life is 3 years)

Generally, ADS may be used as an option to regular MACRS, but in some cases taxpayers must use ADS. Also, under ADS the straight line method of depreciation is required. Although there are situations where it is warranted, most folks don't elect to use ADS since it takes so much longer to write off the asset investment. Now that interest rates are creeping up again the time value of money is becoming a more important concern, much as it was years ago, so generally the sooner one realizes the tax savings associated with an investment the better.

I don't know of any statutory support for depreciating cattle (bulls or cows) over 3 years or tractors over 5 years.

Clearly, the use of Section 179 can be very useful to effect a great amount of fine tuning of a taxpayer's tax situation. A+, Section 179 is probably what your accountant used in order to essentially deduct 100% of the cost of equipment in the year placed in service, rather than depreciating the equipment over the usual MACRS lives. But the election to use Sec. 179 is made on Form 4562, the same form on which you report all the other depreciation related items.

A final note: persistent and demanding clients can at times no doubt prevail upon some H & R Block clerks (and some degreed accountants and CPA's as well) to apply the tax code in an incorrect manner. Of course that doesn't make the resulting tax return correct --- same issue as running red lights -- you may be able to successfully do it forever, but it is also possible that you'll have to pay for your "misdeeds" at some time if they are discovered by the right person.