Profit ??

[xbred]

"Gulf coast Cattleman" page27...in reference to the IRS and cattle expenses..."assume you buy a cow for $800, keep her for 10 years and then sell the animal for $600. The profit is $200, which is depreciateated over 10 years. Annual depreciation on this animal is $20. So every year, $20 is expensed against the calf crop for this cow's depreciation."
I thought I understood depreciation, but apparently not...how does selling an $800 animal for $600 equate to $200 profit?? I'll have to talk to my tax lady...I thought you depreciated the purchase price of the animal over a certain # of years, say $800 over 5 years =$160 per year depreciation per year...then the sell price was all profit (less expenses)...If someone could take all I don't know they could write a large book...

 

[backhoeboogie]

Looks like there's one typo in that write from my perspective.

 

[1982vett]

Looks like there's one typo in that write from my perspective.

Agree, looks like a typo.

Really looks like absolute gibberish if you don't follow what the writer is trying to say.

The writer is trying to show after the purchase and sale of the cow; If you keep this cow for 10 calves, each calf has a "cow purchase cost" of $20. $800 paid for the cow + $600 from the sale of the cow = $200 of expenses spread over 10 calves. $20 per calf. Much the same way you would figure Bull cost per calf. $ paid for bull + $ received from sale of bull = X divided by number of calves sired by bull.

Wouldn't use his depreciation method, but as stated, it is for analysis use.

Not sure what the exercise is really good for because you don't know that the cow cost is $20 per calf till after you sell the cow. I mean your first calf has a cow cost of $800. You would be hard pressed to get $600 for that cow today. The cow can easily die anytime after you purchase her making the cow cost per calf soar. So all this exercise is good for is a business plan to show a banker (I presume).

 

[Jim62]

I doubt that the IRS is the least bit interested in the cow cost per calf. In his example, it looks like the sale of that cow would be a wash.

 

[1982vett]

I doubt that the IRS is the least bit interested in the cow cost per calf. In his example, it looks like the sale of that cow would be a wash.

Actually, their is a $200 (loss) in the purchases and sale of the cow. It is a legitmate business expenses and has been expenses correctly over the 10 year ownership period.

I paid under $500 for most of the cows I had bought 6 years ago and sold because of the drought. When I sold them I got around $600-750 for the cow. I had a capital gain on the cows. Never did find any calves born with born with $20 bills stuck to their ears. :lol: