I would not presume to tell you how to prepare your 1040 Schedule F. I wouldn't fill out your taxes for you if you were paying me. All I am saying (to you and anybody else here) is I think that the IRS believes that real property (ie land) appreciates over time NOT depreciates so there is no easy way to expense your "land costs" in a way that is acceptable to the IRS's band of auditors.
Profit made off of cattle !
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Brandon,
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It is simply a government agency based on laws not beliefs.
Nor does land always appreciate.
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SL
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The IRS "believes" nothing as it is incapable of any beliefs.
It is simply a government agency based on laws not beliefs.
Nor does land always appreciate.
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Bull! All you need to do is incorporate.
SL
Arnold Ziffle
Well-known member
SL, sorry if that's the way you interpreted it, but I didn't accuse you of saying that you can depreciate land for tax purposes --- my comment was just a verification of a thought that Brandonm2 had expressed (correctly) a few posts earlier.
However, you did post about doing something that would be just as incorrect as depreciating land, when earlier in this topic discussion you wrote:
"And if you expense your land you most likely will have a loss from your cattle operation and that loss will also put money in your pocket come income tax time if you have other income. It's that simple."
I'll not make any further comment on this issue of expensing land costs since I think there are too many peeing contests going on as it is here at CT lately but, simply put, the tax law doesn't allow anyone to expense land cost if it's just a self-charged, phantom deduction and not a true rental payment to another third party or entity. Good luck to you and yours. AZ
However, you did post about doing something that would be just as incorrect as depreciating land, when earlier in this topic discussion you wrote:
"And if you expense your land you most likely will have a loss from your cattle operation and that loss will also put money in your pocket come income tax time if you have other income. It's that simple."
I'll not make any further comment on this issue of expensing land costs since I think there are too many peeing contests going on as it is here at CT lately but, simply put, the tax law doesn't allow anyone to expense land cost if it's just a self-charged, phantom deduction and not a true rental payment to another third party or entity. Good luck to you and yours. AZ
Sir Loin":1fo16c67 said:
TRUE, land does NOT always appreciate; but whether your land investment appreciates or depreciates the only time that it matters, for IRS purposes, is when you sell it and deduct the original purchase price for either a capital gain gain or a capital loss. People graze cows on $300,000 an acre property all the time. The IRS does not care about their lost opportunity costs.
The IRS DOES have beliefs. It is printed up in the voluminous tax code and the IRS's interpretations of that tax code as well as all the rulings made by in the past by the tax court. Smarter minds than you or I have already ruled how land may be treated on a farmer's 1040 Schedule F and if you will take the time to read the Schedule F instructions you will probably find their explanation as to
Sir Loin":1fo16c67 said:
Of course. However remember that your farm may decrease it's tax liability by paying rent to the L.L.C. that owns YOUR ranch and your ranch L.L.C. will have to pay taxes on that "income". Then IF you want the money back(and for tax purposes the money had better be physcially present in the L.L.C.s account), the ranch L.L.C. will have to pay it to you in the form of salary or dividends. Then you will have to pay personal income taxes on that salary or dividends.
Brandonm,
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Mom and pop retain full ownership and the LLC pays rent to them for the portion that is used to raise cattle. And yes the rent $$ is counted as income on their personal filing.
Mom and pop also own the LLC so any profit or loss, after the expenses (including rent to mom and pop) that the LLC incurs is transferred back to mom and pop's personal income filing.
What is it with you and the IRS? Why do you seem to have such a fear of them? :roll:
SL
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You have that backwards!
Mom and pop retain full ownership and the LLC pays rent to them for the portion that is used to raise cattle. And yes the rent $$ is counted as income on their personal filing.
Mom and pop also own the LLC so any profit or loss, after the expenses (including rent to mom and pop) that the LLC incurs is transferred back to mom and pop's personal income filing.
What is it with you and the IRS? Why do you seem to have such a fear of them? :roll:
SL
CUZ
Well-known member
SL - You can deduct all of the phantom expenses you can conjure up, just as long as you don't get caught.
Why not deduct the cost of the water you use? Just figure what it would have cost you to purchase it. Get TVA to give you a quote, get it notarized and prayed over by your favorite TV preacher.
Here's another, deduct the cost of sunshine used. (Here is my OFFICIAL quote, I will provide 1 month of sunshine, subject to availability, for the price of $80,000,000,000, terms net 30.) Now all you need are two more quotes, a notary and you'll have deductions out the wazoo.
While you're at it why not claim all of the cows as dependents, just be sure to give them people names as Bossy Loin and White Face Cow Loin might raise some eyebrows.
(While you're away, can you get Michael Vick's autograph for me?)
Why not deduct the cost of the water you use? Just figure what it would have cost you to purchase it. Get TVA to give you a quote, get it notarized and prayed over by your favorite TV preacher.
Here's another, deduct the cost of sunshine used. (Here is my OFFICIAL quote, I will provide 1 month of sunshine, subject to availability, for the price of $80,000,000,000, terms net 30.) Now all you need are two more quotes, a notary and you'll have deductions out the wazoo.
While you're at it why not claim all of the cows as dependents, just be sure to give them people names as Bossy Loin and White Face Cow Loin might raise some eyebrows.
(While you're away, can you get Michael Vick's autograph for me?)
Cuz,
First, there is only room for one sarcasum AH on here and as I am king of sarcasm, get your own stick!
Why don't you try being the "class clown" because I am already laughing my A off at you.
Now
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Due to the drought 2 ponds went dry and we had the water Co put a meter on a fire hydrant and we back out tanker truck up to the meter and fill it with 3,000 gal per day.
And yes that water cost will be expensed just like as if we bought 3,000 lbs per day of feed.
SL
First, there is only room for one sarcasum AH on here and as I am king of sarcasm, get your own stick!
Why don't you try being the "class clown" because I am already laughing my A off at you.
Now
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There is nothing phantom or illegal what so ever about deducting land cost or depreciation. Every corporation in America does it.
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We did and we are right now.
Due to the drought 2 ponds went dry and we had the water Co put a meter on a fire hydrant and we back out tanker truck up to the meter and fill it with 3,000 gal per day.
And yes that water cost will be expensed just like as if we bought 3,000 lbs per day of feed.
SL
CUZ
Well-known member
Sir Loin":2c0vleyo said:
DUH, of course you can deduct the water cost NOW. It's a legitimate expense, because you are actually paying someone for it.
As far as your deducting the phantom land expense, you can do it all day long just as long as you don't get caught.
I tell folks all the time not to get their tax advice from the UPS man. He might tell them what they want to hear, but that doesn't make it true.
Cuz,
Seriously now!
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It's real, actual and physical just like any other commodity you would buy or lease to raise cattle.
What's the difference between leasing a tractor or land? Nothing! They are both an expense.
I have always expensed my land cost and my accountant says I should and that all corporations do it.
Do you think that GM doesn't expense the land their assembly plants sit on?
SL
Walt,
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SL
Seriously now!
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What is phantom about it?
It's real, actual and physical just like any other commodity you would buy or lease to raise cattle.
What's the difference between leasing a tractor or land? Nothing! They are both an expense.
I have always expensed my land cost and my accountant says I should and that all corporations do it.
Do you think that GM doesn't expense the land their assembly plants sit on?
SL
Walt,
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Yes! If you receive a water bill for the water that evaporates.
SL
CUZ
Well-known member
Sir Loin":366p192b said:
As outlined in your tax fraud scheme -
"Now there are several ways to set the expense of the land that you must have if you run cattle.
1. Contact three realtors and ask them what you could rent or lease raw land for on a long term basis. Say for 5 years.
2. Record the date, their company names, addresses and phone number and the person you spoke to, for future reference as they are expert witnesses if a question should ever arise.
3. Average the three. If it comes out to say $4.00 per acre that is what you expense. $4.00 per acres X the number of acres, "USED TO RAISE THE CATTLE only". This does not include the 5 acres your house. Pool, tennis court and garage sits on and the area you use for your use. AKA the lawn.
So now we are talking about 50 acres, not 55.
$4.00 X 50=$220.00 per year That is the fair market rental or lease value of your land.
Now I will stop there in case you have any question on this method.
SL"
ANSWER
- NO money (or the promise to pay money )changes hands. All you did was find out "WHAT YOU COULD" rent it for. This is strictly a "make believe" transaction.
- Kind of like "I COULD buy that $25,000 Bull. Why don't I put him on the books too? Lightening COULD hit him, HEY, I've got a $25,000 loss.
-Even in your pretend expense calculation you couldn't help but take an extra $20. $4.00 X 50 = $200.00.
Now, if you disagree and REALLY BELIEVE you have some kind of point, then you will need to be much more explicit with your details so an average Joe can see if there is any validity in your claim. (If this is just an attempt at one-up-manship so someone will talk to you, then just say you're lonely and need someone to talk to.)
PS As far as BIG corporations expensing their land, they don't if they also own the land. However if some other entity owns the land then they are not expensing Land but are expensing RENT.
PSS Sunshine rental just went down to $4,000,000 per month, so you'd better hurry and get those other two quotes, or the next thing you know it'll be FREE and you'll lose a good phantom deduction.
Cuz
Here boys take a look at this!
Cow Budget
Costs and Expected Returns
(100-Cow Unit)
Item $/Cow
Variable Costs:
Feed & Hay $61.45
Vet/Medicine $15.00
Transportation/Marketing $7.50
Taxes, Misc. $6.00
Pasture $112.04
Bull Maintenance $7.50
Vehicles & Machinery $32.00
Interest, Operating $12.68
Total Variable Costs: $254.17
Fixed Costs:
Land (opportunity cost) $31.80
Bulls (depreciation and interest) $16.65
Cows (depreciation and interest) $58.50
Vehicle & Machinery (dep. and int.) $21.11
Total Fixed Costs: $128.06
Total Fixed & Variable Costs: $382.23
90% calf crop, no replacements saved.
Sourse: http://www.noble.org/ag/Advice/Ranch/Buying.htm
My daddy always told me there were two people you shouldn't discuss things with and that is a person who doesn't know what they are talking about and a fool.
Now all you have to do is figure out which one you are. :lol:
I'm out of here!
SL
Cow Budget
Costs and Expected Returns
(100-Cow Unit)
Item $/Cow
Variable Costs:
Feed & Hay $61.45
Vet/Medicine $15.00
Transportation/Marketing $7.50
Taxes, Misc. $6.00
Pasture $112.04
Bull Maintenance $7.50
Vehicles & Machinery $32.00
Interest, Operating $12.68
Total Variable Costs: $254.17
Fixed Costs:
Land (opportunity cost) $31.80
Bulls (depreciation and interest) $16.65
Cows (depreciation and interest) $58.50
Vehicle & Machinery (dep. and int.) $21.11
Total Fixed Costs: $128.06
Total Fixed & Variable Costs: $382.23
90% calf crop, no replacements saved.
Sourse: http://www.noble.org/ag/Advice/Ranch/Buying.htm
My daddy always told me there were two people you shouldn't discuss things with and that is a person who doesn't know what they are talking about and a fool.
Now all you have to do is figure out which one you are. :lol:
I'm out of here!
SL
Central Fl Cracker
Well-known member
If I sell a calf at 600 lbs. @.95 a pound I gross $ 570 dollars. Cost for that cow is as follows
lease 20 per ac.( 1 per 2 ac.)
fertilize at $30 per ac.
Minerals
Hay ( 2 rolls per head per winter)
no tractor
no labor
I net about $ 200 per calf if the spring and Fall Gods bring rain each year.
lease 20 per ac.( 1 per 2 ac.)
fertilize at $30 per ac.
Minerals
Hay ( 2 rolls per head per winter)
no tractor
no labor
I net about $ 200 per calf if the spring and Fall Gods bring rain each year.
All this talk of depreciation, taxes, IRS audits, GNP, and the annual increase value of land and property, makes my stomach churn but I guess it's a fact of life for a rancher.
As for a small operation, I can't figure out how anyone can make a profit raising cattle. The numbers just don't seem justify the time and commitment required to be successful in the cattle business.
Purchased my first lot of feeders this year and sold them at a lose of just under $1000, not taking into consideration equipment expenses. Have done much better on my second lot I purchased over 150 feeders and contracted for an early November delivery at a profit of almost $200 per head. As of today I have not lost a single calf to death and only 2 to theft. My first lot was purchased at a sale barn; the 2nd lot was purchased from an individual rancher looking to sell his entire calf crop in one transaction. I have purchased everything from land, tractors, trailers, over 8000 feet of new wire fence including labor costs, and cattle. I don't know if I will ever make a profit raising calves but am enjoying the lifestyle and hate the office life.
As for a small operation, I can't figure out how anyone can make a profit raising cattle. The numbers just don't seem justify the time and commitment required to be successful in the cattle business.
Purchased my first lot of feeders this year and sold them at a lose of just under $1000, not taking into consideration equipment expenses. Have done much better on my second lot I purchased over 150 feeders and contracted for an early November delivery at a profit of almost $200 per head. As of today I have not lost a single calf to death and only 2 to theft. My first lot was purchased at a sale barn; the 2nd lot was purchased from an individual rancher looking to sell his entire calf crop in one transaction. I have purchased everything from land, tractors, trailers, over 8000 feet of new wire fence including labor costs, and cattle. I don't know if I will ever make a profit raising calves but am enjoying the lifestyle and hate the office life.
