Receiving Cattle as a Gift

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MBowen

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I searched to see if anyone had posted this before - and so no results - therefore I ask.

What are the TAX liablities I should know about should we receive cattle as a "gift".
There are 6 cows and 1 bull, reproducing - no problem - we have 1 cow due to birth in Jan.

The land they are on is family owned - we would be responsible for feeding, care, and selling as needed. Plus paying some of the property taxes - which isn't hard.

I have found where the giver is going to get some good write off's giving us the herd - but where are we going when we accept that gift?

Thanks!
M & M
 

grannysoo

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Your only tax liability is going to be when you sell some or all of them. Then the sale will be income that should be reported on your tax return.

But...... sounds to me like you're going to be into farming/ranching now, so anything and everything you do to the farm/ranch can now be deducted as expenses.

Play your cards right and you can lose lots of money doing this. :lol:

Check with your accountant.
 

TexasBred

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MBowen":3e48fas9 said:
I searched to see if anyone had posted this before - and so no results - therefore I ask.

What are the TAX liablities I should know about should we receive cattle as a "gift".
There are 6 cows and 1 bull, reproducing - no problem - we have 1 cow due to birth in Jan.

The land they are on is family owned - we would be responsible for feeding, care, and selling as needed. Plus paying some of the property taxes - which isn't hard.

I have found where the giver is going to get some good write off's giving us the herd - but where are we going when we accept that gift?

Thanks!
M & M


Just remember that anytime someone takes a deduction from his taxable income, Uncle Sam expects someone else to report Income in that amount.
 

1982vett

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grannysoo":2e9t55di said:
Check with your accountant.


#1 place to start, now, so you know what information to collect.

Essentially, as long as the value of the gift is under $13,000 for each gift (2009 rules) from each giftee, no gift taxes are due. As far as cost basis of the gift, which needs to be tracked, the original cost basis from the previous owner passes on to the new owner.

Now if the gift is inherited, a step up in cost basis is the rule and you start a new depreciation schedule from the new "step up" basis.

The best advice is to consult a CPA, one that is familiar with filing Schedule F. Download, read and understand this: http://www.irs.gov/pub/irs-pdf/p225.pdf

MBowen":2e9t55di said:
The land they are on is family owned - we would be responsible for feeding, care, and selling as needed. Plus paying some of the property taxes - which isn't hard.

I have found where the giver is going to get some good write off's giving us the herd - but where are we going when we accept that gift?


Thanks!
M & M

These are now expenses that are accountable on Schedule F.

The giver might need to check with is CPA. They aren't entitled to a write off in the sence of claiming a loss for giving an asset away. The best they can accomplish is reducing the value of an estate.
 

Douglas

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"Just remember that anytime someone takes a deduction from his taxable income, Uncle Sam expects someone else to report Income in that amount.[/quote]"

The exceptions to this rule is critical to understand. The only expenses that are deductible are business expenses and a few others (mortgage interest, charitable contributions etc.). The way many small business survive is by putting cash received in their pocket and not report it. The key is that the person paying you is not deducting that payment. People buying food at a restaurant, hobby farmer with a horse pasture paying someone to mow it or spray it. Since these are not business expenses and are not deductible expenses there is no paper trail. Freezer beef has no trail, corn maizes, roadside produce, etc. when paid in cash.
I am not saying it is right to not report these things just that it is hard for the IRS to track except by looking at your overall lifestyle, which should always be similar to your income.
 

1982vett

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I'll add another though to my post. Do your homework and get your part of the deal correct. If the giftor gets his tax liability wrong so be it. Just be sure you get yours right and you will not have a problem with the IRS.

Another little thing that needs to be made clear. Is this truely a gift or is it a form of payment or barter exchange?
 

alftn

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PLEASE EXPLAINE , how the giver gets a tax right off??? Are you a church or a non-profit org.?
 

talldog

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Douglas":3ivb4ria said:
"Just remember that anytime someone takes a deduction from his taxable income, Uncle Sam expects someone else to report Income in that amount.
"

The exceptions to this rule is critical to understand. The only expenses that are deductible are business expenses and a few others (mortgage interest, charitable contributions etc.). The way many small business survive is by putting cash received in their pocket and not report it. The key is that the person paying you is not deducting that payment. People buying food at a restaurant, hobby farmer with a horse pasture paying someone to mow it or spray it. Since these are not business expenses and are not deductible expenses there is no paper trail. Freezer beef has no trail, corn maizes, roadside produce, etc. when paid in cash.
I am not saying it is right to not report these things just that it is hard for the IRS to track except by looking at your overall lifestyle, which should always be similar to your income.[/quote]
Very wekk said !! :tiphat:
 

HerefordSire

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alftn":1sth1qdp said:
PLEASE EXPLAINE , how the giver gets a tax right off??? Are you a church or a non-profit org.?


One example: a parent can give as a gift, up to $10,000, per person, to a child in an attempt to legallty evade 50% estate tax threshold of around 3/4 of a million dollars net worth when dying.
 

HerefordSire

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HerefordSire":31laygpk said:
alftn":31laygpk said:
PLEASE EXPLAINE , how the giver gets a tax right off??? Are you a church or a non-profit org.?


One example: a parent can give as a gift, up to $10,000, per person, to a child in an attempt to legallty evade 50% estate tax threshold of around 3/4 of a million dollars net worth when dying.


It is 13,000 and a million or more this year.
 

Brandonm22

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alftn":2gorajaa said:
PLEASE EXPLAINE , how the giver gets a tax right off??? Are you a church or a non-profit org.?

The giver gets no tax right off. The gift receiver doesn't have to report gifts totalling $13,000 or less. Over $13,000 and the receiver has too report the income. If the gift giver takes a tax right off he is reporting it as a business transaction. YOU the gift receiver would then have to report the income. That is NOT a gift but rather is just bartering for services rendered.

A lot of old people will sign over farms or homes too adult children to protect the assets from medical bills, nursing home bills, and estate taxes. 9 times out of 10 this is done FRAUDULENTLY. The IRS really should sign more investigators into this kind of fraud.
 

HerefordSire

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That doesn't sound right. By giving as a gift to a child if over the net worth threshold, the parent avoids the 50% estate tax rate for the sum of the gift is lieu of the child's tax rate which is usually lower when parent death occurs.
 

Brute 23

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alftn":125q68ks said:
PLEASE EXPLAINE , how the giver gets a tax right off??? Are you a church or a non-profit org.?


It is not a tax write off. The giver is just trying to lower their net worth or income. By giving it away they can, as already said, avoid nursing homes getting it or large amounts of taxing at death.
 

Brandonm22

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HerefordSire":37h2rjav said:
That doesn't sound right. By giving as a gift to a child if over the net worth threshold, the parent avoids the 50% estate tax rate for the sum of the gift is lieu of the child's tax rate which is usually lower when parent death occurs.

Get a CPA's opinion before actually doing anything in the real world. The six cows in this scenario are below the gift tax threshold so that is legal. If however you gave your kids the title to your 200 acres while you are still alive, the kids have to report and pay gift tax on the transfer. Otherwise that is a fraudulent transfer and technically the IRS can declare it such (would they ever catch it is the real question) and either hit the kids with a bill for the unpaid gift tax plus interest and penalties or declare the transfer null and void and hit the estate with the estate tax. The tax code is very complex and there are often ways to do what you want to do but you have to do everything in the properly documented way for it to be legal. For example you could turn the ranch into a privately held company and legally gift $12,000 worth of the closely held stock every year for 20 years and transfer it all that way (beware the kids selling it, losing it in a divorce, or other legal problems and evicting you from your own farm). You also have to factor in the basis. IF the kids inherit a $500g ranch and sell it, they pay no taxes. If you sold it to the kids for $50 then they sell it they pay ~$125,000 in taxes (if capital gains is 20% and AL tax is 5%).
 
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MBowen

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WOW you all are great. A friend of ours is a CPA and she also gave us some details and pointed us to the Schedule F which will be my bed time reading for the next week.

I am going thru each post - I do APPRICIATE ALL RESPONSES!

Thanks!

M
 

1982vett

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The skinney on the numbers.

http://www.irs.gov/businesses/small/art ... 78,00.html

Exclusions

The annual exclusion for gifts is $11,000 (2004 - 2005), $12,000 (2006 - 2008), $13,000 (effective January 1, 2009 per IR 2008 -117).
The applicable exclusion amount is increased to $3,500,000 for estates effective for decedents dying on or after January 1, 2009 and remains at $1,000,000 for gifts.






Definition of skinny.

NounSingular
skinny
Plural
skinnies


skinny (plural skinnies)


2. (colloquial) The details or facts; especially, those obtained by gossip or rumor.

http://en.wiktionary.org/wiki/skinny
 

Brandonm22

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Be careful with that!! The death tax laws change in 2010 and again in 2011, although the new Congress is expected to alter them again sometimes soon. The current estate tax is 45%, NEXT YEAR there will be no death tax, in 2011 and beyond the top rate bounces back to 55%, though the Congress is likely to change that before it happens. This is also why you need a CPA to develop a wealth transfer plan. YOU can gift MUCH larger amounts than the $13,000 a year individual ($26,000 a year for a married couple filing jointly) up to a $million limit lifetime (gift taxes would then have to be paid on any gifts after the $million threshold), but IF you do it decreases that $3.5 million exclusion at the time of death.....since that 55% rate is the highest tax rate of any income I can think of currently on the books I would not casually burn up that $3.5 million especially factoring in what inflation COULD do in the next ten years.
 
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