Cow dispersal - Tax question

[Farmer Z]

My neighbor just sold his small cow herd. He asked me about the tax consequences...in other words, are the proceeds from this type sale taxable? I didn't know how this would be treated. Of course, he'll consult a CPA. In the meantime, what can y'all share with me around this?

 

[lavacarancher]

There's always a tax consequence. If he made a profit then he owes, if he lost money then he doesn't owe as much. The CPA can figure all that out.

 

[Douglas]

If he can document a drought which caused the need to sell, he could defer his gain and use that gain to purchase future cows. Got to complete within 2 years i think.

 

[kenny thomas]

If he had bought and depreciated the cost of the cows out he would be taxed on all of the sale as a profit.
If he bought and did not depreciate he would only have to pay for the profit or maybe not if there is a loss in the value.
If he raised them he will have to pay on the total sale price.
I think this is correct but again his CPA can tell him best.

 

[Jogeephus]

If he can document a drought which caused the need to sell, he could defer his gain and use that gain to purchase future cows. Got to complete within 2 years i think.

That's right. Its called involuntary conversion.

 

[Farmer Z]

Thanks for the info. I think he bought all his cows so that should help him. On the other hand, I don't know if he did the depreciation thing. I know this, Uncle Sam will get his share!

 

[Douglas]

I have never gotten a 1099 from a sale barn.

 

[Farmer Z]

Ha! I hear you Douglas!! The thing is, he's going out of business and he's got to make sure the IRS is happy. In other words, this close-out needs to dovetail with what he's been doing in the past, I reckon.

 

[tytower]

Im thinking that should pretty well answer the OP

I have a related question someone in the States might answer for me.

When you sell your cattle can you sell them for cash ?
Who do you tell about the sale -have you got to put any paperwork in on it?
Is it different in each state or a Federal thing?

We have to put brands and RFID eartags on them and make out a shipping form (waybill) and the sale is recorded all the way through
Our tax treatment in Australia is much the same. We do a stock accoun,t numbers in and cost, against numbers out ,and cost - net profit or loss gets set off against cost of goods sold in the Trading Statement which gives Gross Profit

Gross Profit goes into the Profit and Loss Statement against which all your expenses are deducted . I'm a CPA and all my learning 50 years ago was based on American Accounting books.

 

[Jogeephus]

Tytower, you can sell them for cash without any documentation if you wish. The cash could become a problem if you are trying to hide it cause the BSA law that the banks have to abide by which has now evolved into the Patriot Act. Additionally, under Pelosi's Health Care Reform law you are now required to send a 1099 to anyone and everyone you paid over $600 during the year. Whether the sale barns will be forced to do this is yet to be seen. Its rather silly since check transactions are already tracked under the aforementioned acts. Personally I'm not going to do it and I know several other businesses that have said the same cause this would bury use in paperwork. (there is a law against this too....I thought)

 

[Howdyjabo]

I got to calculating how many 1099 I would have to make out-- I really don't need another "un paid" part time job.
what bothers me most, is that I have to give and get Social Security numbers for the paperwork.
I really don't want my SSN floating around that much and I sure don't want the responsibility for everyone elses SSN

 

[Jogeephus]

I'm afraid this wouldn't be a part time job but a full time one for me. Pretty sure I'd have to hire a full time book keeper just to handle this. Seems they are really groping for every penny they can and strangling the any incentive one might have to own a small business. All of this so they can have the money to buy votes with their wasteful grants and gimme programs. I can hardly wait to see what other little things this new health care program has tucked within its voluminous pages. But at least the insurance companies cannot deny you insurance without suffering some consequences. A hundred dollar a day fine for denying insurance coverage payable to the treasury department sounds more like a payoff than a fine to me. Maybe this explains why those stocks jumped after the passage of this bill.