C HOLLAND
Well-known member
dun":dsmqqf05 said:
SOLD and who needs fencing. :lol: :lol:
Profit made off of cattle !
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SOLD and who needs fencing. :lol: :lol:
dun":3sudj0ti said:
That has already been done....they add some fancy automatic grain feeders and call it a Texas game ranch!
http://www.landsoftexas.com/Texas/index ... V_ID=57668
Ryder
Well-known member
We have talked about this in the past. A lot of new people since then I guess.Caustic Burno":uoc0wpxx said:
Caustic knows exactly what he is talking about.
Land prices are a type of market. Markets, any free market, goes up and it goes down. There is a saying in the world of markets, investing, and trading, "No tree grows to the sky". Markets are like trees. It can go up so long and so high that people with a short time frame perspective think it will always go up, like a tree that will grow to the sky. Is not going to happen.
But there are people that believe that land will always go up because they are not making any more of it. Likewise some believe the stockmarket will go to the sky and never come down.
It is each persons right to believe what ever they want. Go right ahead. That is what makes markets.
Another term is "Dumb Money". That is the money that comes in buying at or near tops. Smart money is the money gained by selling to the dumb money.
At bottoms the dumb money people sell and the smart money people buy.
Re:
To carry a loss, instead of a profit, from the cattle operation over to their (personal) other taxable incomes, such as from your day job or cash taken out of an IRA or 401K etc. etc
And to be able to provide other tax deductible benefits for the family that would not otherwise be tax deductible if you incorporate. Such as life and health insurance, and contributions to 401Ks, all of which builds "real net worth".
IMO, almost any fool can make money raising cattle. The secret is to not give your profit to the government for your additional effort and hard work.
Why would you want to work hard to make a profit, pay taxes on it, then use what's left to buy health insurance or a new vehicle when you could buy the health insurance or truck and have it tax deductible before you pay taxes?
SL
Short answer: To take full advantage of all available legal tax advantages of a farming/ranching operation.
To carry a loss, instead of a profit, from the cattle operation over to their (personal) other taxable incomes, such as from your day job or cash taken out of an IRA or 401K etc. etc
And to be able to provide other tax deductible benefits for the family that would not otherwise be tax deductible if you incorporate. Such as life and health insurance, and contributions to 401Ks, all of which builds "real net worth".
IMO, almost any fool can make money raising cattle. The secret is to not give your profit to the government for your additional effort and hard work.
Why would you want to work hard to make a profit, pay taxes on it, then use what's left to buy health insurance or a new vehicle when you could buy the health insurance or truck and have it tax deductible before you pay taxes?
SL
CB,
Re:
If you same $1,000 in property taxes that is money in your pocket.
And if you take that same money out of your pocket and buy 2 feeders @ $500 each, they are free because without the cattle you wouldn't have the ag assessment and without the ag assessment you couldn't buy the cattle.
And you can get 2 more free feeders next year and each and every year there after.
And if you get a bull and a heifer the first year and 2 heifers the second year, you now have the begingings of a heard of cattle, and they were all free.
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.
If you don't have any other income then just the ag assessment puts money in your pocket.
SL
Re:
Wrong!
If you same $1,000 in property taxes that is money in your pocket.
And if you take that same money out of your pocket and buy 2 feeders @ $500 each, they are free because without the cattle you wouldn't have the ag assessment and without the ag assessment you couldn't buy the cattle.
And you can get 2 more free feeders next year and each and every year there after.
And if you get a bull and a heifer the first year and 2 heifers the second year, you now have the begingings of a heard of cattle, and they were all free.
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.
If you don't have any other income then just the ag assessment puts money in your pocket.
SL
Sir Loin":o56dpq94 said:
Most cattlemen can jiggle the numbers so that they are not in a high tax bracket (heck I have bought next year's hay at Christmas before, prepaid the Coop for fertilizer I need in March 60 days in advance, filled up the barn at Christmas with wire and t-posts for fence construction, and held the last load of November calves to February before). That the IRS lets us do cash accounting instead of the accrual method (every other business has to use) means we control what we pay in taxes...within reason. If you got a $250,000 a year job(so your in the highest tax bracket)....sure do everything possible to post a farm loss. MOST people though would be better off PAYING taxes at a low bracket and saving that basis for a future property transfer (when they would be in an upper tax bracket) than wasting it trying to get another $1200 in wages refund. Heaven help you if some goofy IRS flunkie descides to declare your ranch an abusive tax shelter.
Arnold Ziffle
Well-known member
"expense your land cost". Now that's a concept that I find to be pretty interesting. 
Sir Loin, would you please elaborate, assuming you're not simply referring to expensing rental payments made to a third party landlord and/or rental payments to a land holding legal entity that you own.
Sir Loin, would you please elaborate, assuming you're not simply referring to expensing rental payments made to a third party landlord and/or rental payments to a land holding legal entity that you own.Ryder":6bg2qcig said:
You would be exactly right IF we had a currency that was backed by precious metals. The boom/bust cycle left real assetts FLAT over time through most of the early history of this country. We jettisoned the gold standard partially in the 30s and entirely in the 60s. Yes, there are bubbles (I think we are in one in both real estate and stocks right now); but even with market corrections over time what WAS the ceiling gets passed. Whether it is Dow 10,000 or $1000 an acre grassland the old ceilings crumble. This is because we have a paper dollar that has no value except that you and I (and our creditors) BELIEVE that it has value. We SHOULD have seen a major stock market crash ~2 weeks ago as banks were/are in a a liquidity crisis (they couldn't make new loans because too many of the old loans are in foreclosure); BUT the world's central banks that control "the money supply" dumped $250 million worth of low interest loans to the banks so that they would have money to lend. In a gold standard, they could not do that without cutting into their real gold reserves; but with imaginary money the supply is whatever they want it to be. We have a very loose money supply policy that benefits the banks and the brokerage houses. The dirty little secret that everyone likes to ignore is that in the 1990s the Clinton Administration changed how we calculate the inflation rate. The official rate dropped both energy and food from the calculation. IF we used the old standard we are running nearly 8% inflation versus the warm and fuzzy 2-3% the govt is reporting. Now that does screw old people on a fixed income who are not getting the cost of living increases that their parents got; BUT it saves USgov hundreds of billions by not having to pay out those expensive COLAs and it decreases the amount of interest that USgov has to spend servicing its own massive debts. The moral of the story is that the dollar loses about 5% of its value every year due to inflation. A land investor (like every other investor) has to get at least ~5% per year value increase just not to lose money. The dollar loses value every single year. This is partially why the value of raw land has increased by an average of 7% over time every years since World War II ended even with little things like the early 80s grain glut included. As long as population increases (see govt do nothing to stop the boarder chaos), GNP increases, and the value of the dollar decreases then over time you are going to see raw land values increases. Now the gains of the past two years 14% and 15% are EXCESSIVE and there will be a correction from those levels; but that does not change the direction that the chart is headed over time.
C HOLLAND
Well-known member
This post just help remind me why I can't stand ACCOUNTANTS
:lol: :lol:
:lol: :lol:
Angus/Brangus":hjw8pqa6 said:Txwalt":hjw8pqa6 said:Stepper":hjw8pqa6 said:
If someone has the answer to that please tell me. I started by purchasing 25 acres to get out of the city 2 years ago (2,250 an acre and thats a deal around here for only 25 acres, I had to jump on it). I'm in no hurry and I can make the payments. 3,000ft wasn't fenced and that cost me materials plus sweat. Basically about 4 weekends with help. I wanted 2 cows to get my ag exempt. I asked a friend with a ranch the cheapest deal he could give me to get my ag exempt. He sold me 2 cow calf pairs for $1,000 (12 and 15 year old cows). Even in a drought he was giving me a deal even though I didn't know any better at the time. He told me to feed cubes everyday. When we started getting rain I didn't know I could stop feeding cubes till the board told me. $1300 for the water tap to get water to my cows not including trencher rental, PVC, trough and sweat. I end up in a 50/50 split deal with a friend of mine who has 3 cows and 2 calves. He puts them on my place till his place is fenced (48 acres, only about 800ft around his house to fence it off, will be done in a couple weeks) I get the cows and start browsing this forum. What! I need corals and a chute??? $300 in gas for free chute, $400 dollars in materials for temporary corals. What the be nice is a baldie (google doesn't help). Black leg (my cows are red)? Lipto? Coicidossis (no one spells it right)? Loose minerals or blocks? Horn flies go after polled cows too?
Walt
TxWalt - you have a primary job with the cattle on the side. Create the scenario where your cattle/hay/ag operation meets government regs. Then it's about losses which drive your primary taxable income down via all the expenses. End of story.
I've never thought of it that way. I'm going to look into it and see what kind of hoops I need to jump. But from what I understand about the tax laws I can only post a loss for 2 years before FICA starts snooping around.
Walt
Arnold,
Re:
The first think we have to agree on is "you can't raise cattle without land", period case closed.
Second, if you rent or lease land of course it is an expense and should be carried as a yearly expense.
Now start humming the "Green Acres" theme song.
Ok, so you want to get out of the big city and the farm life is where you want to be. No problem, just buy a farm.
So you find 55 acres with the exact 4 bedroom, 3 bath two story your wife has dreamed of owning. Complete with a pool and tennis court and a 4 car garage. So you pay the $300,000 asking price that you can afford because you and your wife both have a $70 per year job and to keep the ag exemption and make a little chump change on the side you decide to run cattle.
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
Re:
The first think we have to agree on is "you can't raise cattle without land", period case closed.
Second, if you rent or lease land of course it is an expense and should be carried as a yearly expense.
Now start humming the "Green Acres" theme song.
Ok, so you want to get out of the big city and the farm life is where you want to be. No problem, just buy a farm.
So you find 55 acres with the exact 4 bedroom, 3 bath two story your wife has dreamed of owning. Complete with a pool and tennis court and a 4 car garage. So you pay the $300,000 asking price that you can afford because you and your wife both have a $70 per year job and to keep the ag exemption and make a little chump change on the side you decide to run cattle.
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
Txwalt":14nutacu said:
Not so. If a chicken farm in America has ever posted a profit I am unaware of it. They live off depreciating those barns. When the depreciation is about to pay off they update their houses or build another one. You can lose money year after year after year; BUT if you do, you had better be able to defend yourself. The IRS CAN sweep in and declare your operation an "abusive tax shelter" and disallow just about every expense on your 1040F. A lot of tax advisers don't want any part of defending whether or not you are making an effort to make money so they will advise you to post profits (even if you did not!) 2 out of every 5 years as recommended by the IRS. The seedstock industry in America never really recovered from THAT ~1986 tax rule. Before then it seemed like every fourth Doctor in the country was either a Brangus or an Arabian breeder. Get an accountant who actually specializes in ag accounting. He can help you get all the documentation that you will need to have in your file IF you ever get that dreaded letter from our federal masters and can advise you as to whether or not you would be advised to post farm losses or not.
Sir Loin":1fz2dtx7 said:
I owe you an apology. While I don't agree with THAT, I thought you were trying to depreciate the actual purchase price of the land.....an accounting NO-NO and bad tax strategy even if the IRS let you get away with it. Your example would work; BUT either the cows or the land would have to be owned by an L.L.C. As a sole proprieter you can't pay lease prices to yourself. On one hand of the ledger you would have to report the $220 as a business expense; but on the other end of the ledger would have to report the $220 received for the money as income. The two cancel each other out; unless you own the cows and some entity like...Circle Duck Ranch L.L.C. owned the land. You would deduct the rent and the Circle Duck limiting liability corporation would report the income on it's corporate filing. A clever person could make this work in their favor. Me.....I would rather not have to file any more corporate tax returns than I absolutely have to. Each state is different in the advantages or disadvantages of creating L.L.C.s so don't do anything like that without consulting either a CPA or a tax attorney.
vs_cattle
Well-known member
I guess this also can go along with the letter about Taxes on the front page of Cattle today ;-)
Brandonm,
Re:
SL
Re:
No one is leasing anything. No money ever changes hands. I am just establishing a yearly land cost to post as an expense. Just like you do when you buy a cow/bull, tractor, barn or any other commodity you need to run a cattle operation as a sole proprietor.
SL
Sir Loin":ba1qc5cm said:
IF no money ever changed hands, and nobody ever reported it as income it is NOT a legitimate expense. IF you are audited they MIGHT catch it and if they do they will bill you for the difference plus compounded interest and penalties. You can't claim you spent $200 and then not have any explanation as to who got the $200. That would be like me growing out 20 replacement heifers....deducting all the costs of growing them out....then selling them to myself at $1000 each without then accounting for where the $20,000 went to. What you are doing is tax fraud. IT probably will go under the radar, but I would discuss this with a CPA before doing it again.
Arnold Ziffle
Well-known member
Brandonm2 -- you're absolutely right.
Of course for income tax purposes one is not allowed to "depreciate" the land cost. AND one cannot simply establish a fair rental rate and claim a deduction for income tax purposes without adding to the "plan" some other legal entity, as I alluded to in my somewhat rhetorical question to Sir Loin. As to determining a fair rental value, I could survey 100 realtors, farmers, hobby ranchers and Caustic Burno himself and their collective estimates, while interesting and perhaps useful, would be absolutely useless for income tax purposes if I were to attempt to actually claim an income tax deduction for that fair rental if I merely "charged" it to myself. No doubt some folks have done what Sir Loin suggests, but there is just no statutory, regulatory or judicial support for it! Anybody that would try that scheme is probably the same sort that would try to claim a tax loss for the value of a raised animal that died -- it's just not allowed for income tax purposes.
Now if Sir Loin really meant to say that folks should determine a fair rental value for the land used in their cattle business and "charge" the business that rental rate, simply for purposes of determining how well they are running the business and in order to determine some sort of idea of their cattle business profit or loss, I would absolutely agree. In determining the financial accounting results of cattle operations I believe a person with free and clear land should "charge" the business at least for the fair rental of the land --- but that "charge" is not deductible for income tax purposes if it is merely self-charged.
Sir Loin, I believe I know a bit about this issue, as I've made my living for the last 34 years as a tax CPA and have a good number of ranching business clients, in addition to running Green Acres practically by myself (I do get a little help from Eb, but Oliver and Lisa are pretty much useless and just get in my way). :lol:
Of course for income tax purposes one is not allowed to "depreciate" the land cost. AND one cannot simply establish a fair rental rate and claim a deduction for income tax purposes without adding to the "plan" some other legal entity, as I alluded to in my somewhat rhetorical question to Sir Loin. As to determining a fair rental value, I could survey 100 realtors, farmers, hobby ranchers and Caustic Burno himself and their collective estimates, while interesting and perhaps useful, would be absolutely useless for income tax purposes if I were to attempt to actually claim an income tax deduction for that fair rental if I merely "charged" it to myself. No doubt some folks have done what Sir Loin suggests, but there is just no statutory, regulatory or judicial support for it! Anybody that would try that scheme is probably the same sort that would try to claim a tax loss for the value of a raised animal that died -- it's just not allowed for income tax purposes.
Now if Sir Loin really meant to say that folks should determine a fair rental value for the land used in their cattle business and "charge" the business that rental rate, simply for purposes of determining how well they are running the business and in order to determine some sort of idea of their cattle business profit or loss, I would absolutely agree. In determining the financial accounting results of cattle operations I believe a person with free and clear land should "charge" the business at least for the fair rental of the land --- but that "charge" is not deductible for income tax purposes if it is merely self-charged.
Sir Loin, I believe I know a bit about this issue, as I've made my living for the last 34 years as a tax CPA and have a good number of ranching business clients, in addition to running Green Acres practically by myself (I do get a little help from Eb, but Oliver and Lisa are pretty much useless and just get in my way). :lol:
Brandonm2 et al,
I don't think you are grasping the concept here.
I am not telling or suggesting to anyone what to do with the land expense they come up with.
I'm simple telling them the different ways to establish a land expense.
I am not an Attorney or CPA, nor would I ever pretend to be and give legal or accounting advice.
If that is what you want to do, knock yourself out, as it doesn't amount to a hill of bean as far as I'm concerned. I'll just consider your advice and opinions worth what I paid for it.
SL
Arnold,
Re:
Now you can use your land cost to establish a "land expense" that may or may not be tax deductible.
SL
I don't think you are grasping the concept here.
I am not telling or suggesting to anyone what to do with the land expense they come up with.
I'm simple telling them the different ways to establish a land expense.
I am not an Attorney or CPA, nor would I ever pretend to be and give legal or accounting advice.
If that is what you want to do, knock yourself out, as it doesn't amount to a hill of bean as far as I'm concerned. I'll just consider your advice and opinions worth what I paid for it.
SL
Arnold,
Re:
Who ever said you could. I certainly didn't!
Now you can use your land cost to establish a "land expense" that may or may not be tax deductible.
SL
