Form 6198 At-Risk Limitations

[Margonme]

Federal Tax Form 6198 for the purpose of declaring how much investment you have at risk. The activity of farming is an activity for which it is required.

I do my own taxes. I just finished 2016. It amazes me how anyone ever shows a profit. Considering:

farm truck mileage at 54 cents per mile cost me $9,011.52 and I exclude personal use. Honest.
depreciation of fence, structures, truck, equipment, trailer
liability insurance - my farm insurance is now $1,267.66. It covers my equipment, structures, cows, and liability
property taxes
feed and hay cost
fertilizer and lime
fuel
supplies
repairs and maintenance
seeding
utilities - my utilities cost last year was $1,567.12
veterinarian/breeding/vaccination/fly control/parasite control
labor

My question is: Are you filing a 6198?

 

[Bigfoot]

I have often said on here, anybody showing a profit, is doing a poor job of tracking expenses.

 

[artesianspringsfarm]

I have often said on here, anybody showing a profit, is doing a poor job of tracking expenses.

I truly believe for the average small cow/calf guy, I'm talking under 100 pairs, either commercial or registered, you just break even until that last dispersal. Maybe 15 years in you could make a little for a few years before that point but not much. That being said, I love it and can afford to sink some equity into it while the land and hopefully the cattle appreciate and try to maximize the revenue.

 

[skyhightree1]

My question is: Are you filing a 6198?

My CPA does all of mine and im sure he probably does.

I have often said on here, anybody showing a profit, is doing a poor job of tracking expenses.

Very true statement and this year is definitely a year without doing my taxes I know there is no profit AT ALL.

 

[talltimber]

Are you getting reimbursed for mileage AND getting your truck depreciated?

 

[boondocks]

I have often said on here, anybody showing a profit, is doing a poor job of tracking expenses.

I truly believe for the average small cow/calf guy, I'm talking under 100 pairs, either commercial or registered, you just break even until that last dispersal. Maybe 15 years in you could make a little for a few years before that point but not much. That being said, I love it and can afford to sink some equity into it while the land and hopefully the cattle appreciate and try to maximize the revenue.

:wave: neighbor! Are you getting this lovely ice storm?

I only wish we were at the break even point. More like the broke point lol

 

[artesianspringsfarm]

I have often said on here, anybody showing a profit, is doing a poor job of tracking expenses.

I truly believe for the average small cow/calf guy, I'm talking under 100 pairs, either commercial or registered, you just break even until that last dispersal. Maybe 15 years in you could make a little for a few years before that point but not much. That being said, I love it and can afford to sink some equity into it while the land and hopefully the cattle appreciate and try to maximize the revenue.

:wave: neighbor! Are you getting this lovely ice storm?

I only wish we were at the break even point. More like the broke point lol

Straight rain here but its still awful dangerous. Gonna be some buildings that collapse within the next few days for sure. And no, according to my CPA I did far worse than break even. I was glad to hear it though. That was kind of the goal this year.

 

[Bigfoot]

I always worry a little, that a young person will wonder on to a thread like this, and get discouraged (and maybe they should IDK)

I'd like to explain a little:
I'm 45, and started at 18. When I look back at what I had when I started, and how I went about doing things (doing the best I could, with what I had), and compare that to now I feel less discouraged. Although I have never showed a profit that was equal to the work I put in, I have gained. I could disperse my herd, auction my equipment, and sell my farm. I didn't have those things when I started. The sum total of that would put a glimmer in my eye. In other words, in absence of profit I have grown equity. I have also enjoyed a lifestyle that i enjoy. furthermore, it's a great place to raise kids. The benefits outweigh the financial drawbacks.

post script:
I should have already gotten my taxes gathered up, and turned in. I usually do by now. I have put it off, because I know the outcome isn't going to be too hot.

 

[Margonme]

Are you getting reimbursed for mileage AND getting your truck depreciated?

No. My truck was listed property. I depreciated it out in 2015 tax year. So I can only deduct mileage.

 

[Bigfoot]

Are you getting reimbursed for mileage AND getting your truck depreciated?

No. My truck was listed property. I depreciated it out in 2015 tax year. So I can only deduct mileage.

Learned something today. I didn't know you could switch to mileage after the truck was depreciated out. I'm sure my CPA knows, but he has never came to me with a request for mileage after a truck has hit $0.

 

[Margonme]

Are you getting reimbursed for mileage AND getting your truck depreciated?

No. My truck was listed property. I depreciated it out in 2015 tax year. So I can only deduct mileage.

Learned something today. I didn't know you could switch to mileage after the truck was depreciated out. I'm sure my CPA knows, but he has never came to me with a request for mileage after a truck has hit $0.

The mileage is an operating expense. Regardless of whether the truck has been depreciated. I don't have my taxes in front of me but I think I used a 5 year depreciation life on it. After depreciation, you can continue to deduct actual expenses or mileage. It is explained well in the Schedule F instructions

 

[skyhightree1]

I always worry a little, that a young person will wonder on to a thread like this, and get discouraged (and maybe they should IDK)
quote]

If someone wants to do something they will so I wouldn't worry about that.

 

[Bigfoot]

I always worry a little, that a young person will wonder on to a thread like this, and get discouraged (and maybe they should IDK)
quote]

If someone wants to do something they will so I wouldn't worry about that.

We should always conduct ourselves in such a way as to mentor others.

 

[skyhightree1]

I always worry a little, that a young person will wonder on to a thread like this, and get discouraged (and maybe they should IDK)
quote]

If someone wants to do something they will so I wouldn't worry about that.

We should always conduct ourselves in such a way as to mentor others.

I can understand that but when mentoring they also need to be fed the truth and let them make their own decisions. There were many folks that only heard cattle money is hand over fist when the times were good... Some of those folks ran off got loans and incurred a lot of debt to get rich... However, I bet you some of their " Mentors " didn't tell them they could have a pasture full of cattle that their value decreased to 1/3 of what they were. If were gonna tell the story tell the WHOLE story not just the fairy tale endings version.

 

[artesianspringsfarm]

I always worry a little, that a young person will wonder on to a thread like this, and get discouraged (and maybe they should IDK)

I'd like to explain a little:
I'm 45, and started at 18. When I look back at what I had when I started, and how I went about doing things (doing the best I could, with what I had), and compare that to now I feel less discouraged. Although I have never showed a profit that was equal to the work I put in, I have gained. I could disperse my herd, auction my equipment, and sell my farm. I didn't have those things when I started. The sum total of that would put a glimmer in my eye. In other words, in absence of profit I have grown equity. I have also enjoyed a lifestyle that i enjoy. furthermore, it's a great place to raise kids. The benefits outweigh the financial drawbacks.

post script:
I should have already gotten my taxes gathered up, and turned in. I usually do by now. I have put it off, because I know the outcome isn't going to be too hot.

You just said what I was trying to say but for some reason you did make it sound far more encouraging. The way I look at it is, if you think you can steward your farm in such a way that you can grow the equity in it while depreciating it, thus keeping my main income at a lower tax bracket and helping pay off property taxes, etc, its a great thing. Then, any real "profit" will come if you decide to cash out at some point, either in part or in whole. But I also think its wise to tell the youngster that it aint so simple as haul a load of 20 calves and whatever you bring home is profit and let's be honest, that's what most of us thought when we got in it.

 

[talltimber]

No. My truck was listed property. I depreciated it out in 2015 tax year. So I can only deduct mileage.

Learned something today. I didn't know you could switch to mileage after the truck was depreciated out. I'm sure my CPA knows, but he has never came to me with a request for mileage after a truck has hit $0.

The mileage is an operating expense. Regardless of whether the truck has been depreciated. I don't have my taxes in front of me but I think I used a 5 year depreciation life on it. After depreciation, you can continue to deduct actual expenses or mileage. It is explained well in the Schedule F instructions

You're truck is >50%, or whatever the cutoff is, used for farm use? No appreciable personal/commuter use? Reason I ask is that I have been told, on a truck bought year before last, by two different tax preparers, was that if it was used more than a limited amount I could only count mileage, but if it was claimed as a "farm truck" it could be depreciated out over five but no mileage (at least until then). Curious as to what's going on and if I'm shorting myself, and need to find a third tax preparer lol
He has mine at 49.22% farm use.

 

[Margonme]

Learned something today. I didn't know you could switch to mileage after the truck was depreciated out. I'm sure my CPA knows, but he has never came to me with a request for mileage after a truck has hit $0.

The mileage is an operating expense. Regardless of whether the truck has been depreciated. I don't have my taxes in front of me but I think I used a 5 year depreciation life on it. After depreciation, you can continue to deduct actual expenses or mileage. It is explained well in the Schedule F instructions

You're truck is >50%, or whatever the cutoff is, used for farm use? No appreciable personal/commuter use? Reason I ask is that I have been told, on a truck bought year before last, by two different tax preparers, was that if it was used more than a limited amount I could only count mileage, but if it was claimed as a "farm truck" it could be depreciated out over five but no mileage (at least until then). Curious as to what's going on and if I'm shorting myself, and need to find a third tax preparer lol
He has mine at 49.22% farm use.

I deduct mileage at the rate of 54 cents per mile for tax year 2016 on my Ford F-350 "farm truck". My sole occupation is farming. My "farm truck" is solely dedicated to the performance of that occupation. I do not use it to commute to an off-farm job. The truck has already been totally depreciated. Only mileage expenses are deducted this tax year. I don't deduct repairs, oil changes, insurance, license, or property tax.

In regard to depreciation. My reading of the Schedule F instructions indicates that depreciation does not exclude deducting operating expenses. They are separate functions. Depreciation allows you to "write off" the capital cost of the original purchase of your farm truck. Operating expenses allows you to deduct what it costs to operate the truck excluding the capital cost. You should clarify that with your tax preparer. But it does not make sense if you cannot. In my case, I am not doing both in the same year since my farm truck is beyond the depreciation period.

 

[RanchMan90]

Iron sharpens iron I suppose. If I was easily discouraged I wouldn't still be on here lol. If it's treated as business it'll be business (gain or loss), if it's treated as a hobby it will be a hobby. Ive been very fortunate with a good job to be able to invest equity while keeping low debt leverage. Every operation has different expectations and goals which brings good discussion here :cboy:

 

[Margonme]

Iron sharpens iron I suppose. If I was easily discouraged I wouldn't still be on here lol. If it's treated as business it'll be business (gain or loss), if it's treated as a hobby it will be a hobby. Ive been very fortunate with a good job to be able to invest equity while keeping low debt leverage. Every operation has different expectations and goals which brings good discussion here :cboy:

You are exactly right. I view it the same way as you do.

 

[john250]

You'd be amazed how much of my mileage is business-related.