Do ya'll recommend forming an LLC to own cattle and build a herd, or do you just consider them personal property and not fool with maintaining/reporting as a business? I only have 12 cows but plan on growing. However, I do have an LLC on the books already (personal business that never really got legs). No busy roads around, so don't need incorporation for risk/liability reduction. However, maybe purchase of cows as business property could be a deductible expense come tax time? ...What are your thoughts?
cattle ownership: personal property vs. business assets
- Thread starter brihop
- Start date
Help Support CattleToday:
shadyhollownj
Well-known member
On my end I consider it a business and file a schedule C on my taxes for the farm. My concrete business is an LLC but the farm is not. I probably should since its easy to do and only costs like 100 bucks. When 30-40 grand get spent I consider that business and not a hobby of say a few thousand dollars.
Jogeephus
Well-known member
To me it would depend on how much money you plan on making with the cattle cause if you form an LLC you are going to add additional accounting costs for the additional return then this will be kicked back on your personal return. If you have a larger strategy that involves estate planning and stuff I'd do the LLC otherwise I'd keep it simple as possible.
You should be filing a sched F, not a sched C!shadyhollownj":asg2xul0 said:
cow pollinater
Well-known member
I'm the oposite of Jogeephus. I've kept it as simple as I could for as long as I could and my whole life got plopped down on the accountant's desk in one folder for years and I've paid dearly for that simplicity. I wish I would have seperated everything right from the start. It would have made my life simpler(by way of a happier sexcratary/wife) and it would have cut my accountants bill in half.
backhoeboogie
Well-known member
There's only around 75 head in the pasture. Can't rationalize buying a tractor and leasing it to my corp etc. Same with the truck. No way to fly under the radar.
There are no money benefits or tax benefits. The only way you would maybe need and LLC is if you have a lot of assets or wealth oustide of your cattle operation. That away if by some chance your cattle operation got sued they won't take the $5M you have in the bank or in another business.
Jogeephus
Well-known member
cow pollinater":k0ldpd0r said:
Sounds like you kept it too simple. :lol2:
Forming another entity isn't going to solve anything but will only increase your overall tax filiing costs. Good record keeping is essential to any method you choose. Its just as effective to open a "farm account" and keep all your farm related stuff in there and this can be filed on the schedule F along with your personal return. If you have a corporation you will have to first complete this and file this return and then kick out the K1 form for your personal. If you get the first screwed up then your personal return will be messed up and you will have to deal with the IRS and state on two fronts to get it fixed. The other problem with having a corporation is the temptation to comingle money from time to time. To loan one money when it needs it. Its your money so it only seems reasonable that you could do this but this is a red flag and is not something they like you to do and can cause problems. Also, don't know if this is still the case, there for a while there was a lot of abuse in LLC's and these were auditted more frequently than other things.
IMO, unless you have some major assets you need to do some estate planning on or if you are open to some substantial risk, I wouldn't form another entity. In fact, if I had it to do all over again I wouldn't let anyone know I even owned a cow.
Just for the fun of it call the IRS office Monday and ask a simple question. After you wait an hour or so and you speak to one of the brilliant affirmative action hire they employ then make the decision if its safer to have one bird in the covey or several.
1982vett
Well-known member
Purchasing cows already is a deductible or depreciable expense....as is buying anything related to their upkeep.brihop":1x6ovgn9 said:
slick4591
Well-known member
brihop":9vjpdoeg said:
Yeah, the whole ball of wax. Feed, medical, etc... Don't forget to report your sales as well or IRS will shut you down one of these days.
fitz
Well-known member
brihop":38goi9gb said:
I'm a small operator and like bbirder posted earlier, a schedule F should cover your situation. If you have someone prepare your returns they should be able to walk you through it. You want an accountant that knows farming.
fitz
lowellcantrell
Well-known member
Keep it simple; especially if you and/or your spouse have off-farm jobs. Do the schedule F, making sure to document all expenses identified on the schedule F form as well as l farm income.
There's a very good chance you would probably show a loss on the schedule F; especially if you have bought any equipment or "big ticket" items for farm use, or depreciation if you are still paying for the farm. The farm loss shown on the schedule F would help to reduce your overall income thereby reducing your tax liability.
The key is keeping all receipts and organizing them into the correct deduction category to satisfy the IRS. Which brings up another important point. Try to find a tax preparer person that has farming or rancher experience; he or she will know of many more allowable deductions that those hired by the big chain preparation corporations.
There's a very good chance you would probably show a loss on the schedule F; especially if you have bought any equipment or "big ticket" items for farm use, or depreciation if you are still paying for the farm. The farm loss shown on the schedule F would help to reduce your overall income thereby reducing your tax liability.
The key is keeping all receipts and organizing them into the correct deduction category to satisfy the IRS. Which brings up another important point. Try to find a tax preparer person that has farming or rancher experience; he or she will know of many more allowable deductions that those hired by the big chain preparation corporations.
E in PA
Well-known member
Also don't forget mileage and a portion of your property taxes are deductible as well.
I have an "off-farm" job and I lease the land on a per head basis. My expenses have been just purchase of cattle, the annual pasture lease on non-calf bearing heifers and material costs. One issue is, I don't have receipts for materials, the land owner buys them and I pay him (however that cost is relatively minimal). I'm building and retaining heifers so only one calf sold, as we're splitting calf crop on producing cows and I get dibs on my heifer calves and land owner takes his share from my bull calves, therefore the one calf sold. All I have is unofficial looking bill of sales for the cattle and email acknowledgement for lease payment. Total expense/investment so far about $6.5k... chump change to most on this board, I know. Could I be inviting more trouble than the tax deduction is worth?
1982vett
Well-known member
Talking to a tax adviser with experience in this area is well worth the time and expense.....which is also a legitimate expense.brihop":3b88113k said:
Turns out that the big city accountant is the son of a big Minnesota dairy farmer, so he had a great understanding of things. A good year, some large charitable contributions, and ya'lls advice on the sched F netted me a handsome return... thanks a lot for the input guys!
Jogeephus
Well-known member
I hope you didn't save to much of your money cause there are those still needing cell phones AND Dotgov is now giving out free computers and someone needs to pay for these neccesities.
