Rock and a hard place

kbhblazer

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Joined
Mar 22, 2011
Messages
15
I got into the cattle buisness to help on taxes and appraisal district where I live craking down and ag- use. I have 1 bull 9 cows and 6 calves, I was planning on buying more to make the IRS be convinced this is not a hobby. I improved my place and had a tractor beforeI ever had cows, so it not like I'm trying to snow any one. I'm trying to be legit here. But here is the problem. I have the cows split up, the bull 4 cows and calves on my 11 acrs and I leased 28 across the road, for a hay medow and the other cows on the other, the 11 acrs is holding up better than the 28 as far as grass is concerned.I have ponds on both but they are getting real low now.I live in east texas and lke most of texas it ain't raining. It appears there will be no hay and am concerned because I am going to have to start feeding hay soon. I realize there are bad years, we used to have cattle when I was a kid. But right out of the box, it seems I will have to sell if it keeps this weather, and it seems it will.
Also during this time what do I need to suppliment at this time , cubes mineral ?what do I need to have out for them.
Money is the issue, what course of action do I need to take?
Thanks
 
Hi from central Mississippi. Wish I could help you out but I'm new to the boards and cattle business myself ( haven't even bought my first cow yet). I was wondering how much trouble you're having with the IRS? I want to start small and work my way up in the business and was wondering how many head I will need to not be considered a hobby farm? I own 60 acres of land and I'm currently working on fences and getting my pastures ready to hold cattle but money will be an issue for me also. I am not trying to just get tax breaks either but I do want to write off some expenses I am facing.

Would it not be better to sell the calves, feed your cows and bull thru the winter and hope for a better season next year? Seems like that would help you show a profit? (Cattle prices are higher than ever here, or so I'm told). Like I said, I'm completely new to all this so it may not be the thing to do. We went thru a substantial drought here the last two months but the rain is slowly beginning to come. My pastures were almost dead three weeks ago and it's amazing what a 1.5" rain will do for ya. So if you can get some rain things may turn around for you!

This website has been a huge help to me so far with great folks giving me advise and all so I'm sure someone with far more knowledge than me can help ya out. Hope you get some rain and if you have any IRS advise for me, it will be greatly appreciated.
 
I went to a tax professional before getting into this, he advised I would need 20 to 25 cattle to make it where the IRS would not see it as a hobby farm, cattle ain't no hobby. That is all the tax advise I can give, talk to a professional. I try to play straight up with them, they aren't very forgiving.
Thanks for the reply.
 
kbhblazer":37rfitwi said:
I got into the cattle buisness to help on taxes and appraisal district where I live craking down and ag- use. I have 1 bull 9 cows and 6 calves, I was planning on buying more to make the IRS be convinced this is not a hobby. I improved my place and had a tractor beforeI ever had cows, so it not like I'm trying to snow any one. I'm trying to be legit here. But here is the problem. I have the cows split up, the bull 4 cows and calves on my 11 acrs and I leased 28 across the road, for a hay medow and the other cows on the other, the 11 acrs is holding up better than the 28 as far as grass is concerned.I have ponds on both but they are getting real low now.I live in east texas and lke most of texas it ain't raining. It appears there will be no hay and am concerned because I am going to have to start feeding hay soon. I realize there are bad years, we used to have cattle when I was a kid. But right out of the box, it seems I will have to sell if it keeps this weather, and it seems it will.
Also during this time what do I need to suppliment at this time , cubes mineral ?what do I need to have out for them.
Money is the issue, what course of action do I need to take?
Thanks
Start by putting all your cows together and rotating your pastures. Your grass will hold up better. If your not gonna make enough hay, start buying hay now. Dont wait until winter. How old are the calves? You could sale the calves to pay for the hay. Keep a loose mineral out at all times and this time of the year you shouldnt have to feed, but it depends on the cows' condition. Cows dont help on taxes. If you make a profit it is income. The IRS doesnt care how many cows you have as long as you have a plan to make a profit. It hasnt been a easy year for anyone in our area but you just keep going. At least cow prices are high if you sell out. Ive seen a few droughts when I had to cull heavy couldnt get squat for em.
 
kbhblazer,
Are you enjoying your cattle? I realize that you are wanting to make money now, and that is everyone's goal. It is extremely hard to make money with cattle the first several years unless you are born into it. And the first year that you get into it, the winter feed is looking low, you can make some changes.
Do you feel that your bull got your cows bred? I would sell him, unless he was a high dollar bull, and he is what you think will make a big difference in a herd. But he is going to eat a lot of feed.

The next thing I would do, would be to start with the cows that I felt were the lowest on the totem pole, and sell those. Each cow is going to eat at least 6 bales of hay through the winter. Keep the ones that you feel are your very best.

Let your calves get to the prime price stage in your area, and sell those.

If you have a job outside of agriculture, and messing with the cattle is enjoyment at this point, do not sell all of your cattle. If you are a stay at home kind of person, this will be good clean/dirty fun. Nothing like a hobby turning into a way to make a living.

On the 28 acres leased across the road, I might have my cattle on that property, and if I felt I wanted to keep up a hay field, I would put it on the 11 acres. I am not sure how low your pond is getting on the 28 acres or if you have running water to that lot.
If you have access to water, it seems like you will need to install a water line soon.
If the 28 acres was hard to obtain, and is not too expensive to lease, I would hang on to it. It is nice to be able to see your cattle instead of driving 10 miles down the road.
The smaller lot, could grow all of the bermuda hay if it grows there, and some left over for the next year. You could get a cutting off of it every 30 days.
We have one field of Vaughn's on 12, and we keep it fertilized, and on the first cutting, we got 40 bales. This next cutting, we will get more.
A lot of the cattle people will tell you to buy your hay for the amount of cattle that you are running, and use all of your land for grazing. Hay is going for $30-40 a bale, and they charge around $20 to come cut and bale the hay for you in this area. For your hay to do well, you will have to lime that 11 acres if it needs it, and fertilize it each year. Hit it with a little nitrogen between cuttings. So that is something you have to think about.

There is one great advantage that you will have growing your own hay; you did a soil sample to get the fertilizer and soil deficiencies correct; you know that it has been fertilized correctly maintaining the nitrogen levels, (which turns into protein in the grass), from the beginning to the end; what stage it was cut, and you will know that the protein level is high enough to keep your cows fit through the winter. A lot of hay that you buy is cut from old pasture land that has not cattle on it, or CPR land. People will call and want someone to bale a field that is over grown with a little bit of everything. It is a filler and you wind up having to feed grain to maintain your cattle. Personally, I do not want this kind of hay, but if I got in a pinch, I might have to buy it. Be sure to feed grain with it or your cattle will lose weight.

OK, these are just my thoughts.

Chuckie
 
Until you have five years of records it is hard to convince the local tax office to give you an ag exemption. The IRS will not give you much trouble as long as you are showing true "intent" to make a profit and you tax write offs match up with others of your size. In other words don't go crazy with equipment and vehicles charged to your farm business in the first couple of years. You need to have a well thought out business plan written out that you can show the tax folks when they ask. I live in the city limits on 9 acres and was able to convince them of my ag status when I presented them a plan showing that I had more acreage in a adjoining county and I would use this 9 acres to finish out some weaned calves. Be aware that if you obtain a ag exemption and then sell the place or get out of it altogether they will dock you for five years of back taxes.
 
ive never heard of having to wait 5 years to get an ag exemption . I wouldn't bother trying to grow your own hay ..just find someone who tests their hay before they sell it or at least someone you trust to buy it from .you are in east Texas so Bermuda grass will grow well . I' d put my cows on the 28 acres and cut that pasture in half .let your 11 acre pasture grow . Hit it with a little fertilizer in the fall and strip graze it in the winter . When that runs our start putting out hay . As long as you test the hay to see what he protein content is you can make up the difference with range cubes or grain. You will still come out better than growing your own hay .
 
kbhblazer":xwxrimaf said:
I got into the cattle buisness to help on taxes and appraisal district where I live craking down and ag- use. I have 1 bull 9 cows and 6 calves, I was planning on buying more to make the IRS be convinced this is not a hobby. I improved my place and had a tractor beforeI ever had cows, so it not like I'm trying to snow any one. I'm trying to be legit here. But here is the problem. I have the cows split up, the bull 4 cows and calves on my 11 acrs and I leased 28 across the road, for a hay medow and the other cows on the other, the 11 acrs is holding up better than the 28 as far as grass is concerned.I have ponds on both but they are getting real low now.I live in east texas and lke most of texas it ain't raining. It appears there will be no hay and am concerned because I am going to have to start feeding hay soon. I realize there are bad years, we used to have cattle when I was a kid. But right out of the box, it seems I will have to sell if it keeps this weather, and it seems it will.
Also during this time what do I need to suppliment at this time , cubes mineral ?what do I need to have out for them.
Money is the issue, what course of action do I need to take?
Thanks

Well I looking at selling what I have left (13), won't be the first time I sold them all. I have enough hay sitting around here and then some for the winter. I can buy cows in five minutes let your pasture get destroyed and it will take years to recover. You can sell out and get back in you need a good CPA.
 
Man, thanks for the response, much needed advise. Yes I do have a job, thinking of selling the bull after they breed back, as for the claves the oldest is 3 months old, the bull needs to be put on 2 cows across the road, befor he goes. Grass is slim on the 28 acres, but the pasture rotation makes sense.
Thanks
 
Drought is a good reason not to buy into high priced cows. Buy market priced cows that way you can sell them if you have to and come close to breaking even ... if you pay 2 or 3 k for a cow from a breeder she's still gonna weigh when you take her to sell and it won't be anywhere near 2 or 3 k worth .
 
JSCattle,
I never said you have to wait five years for a ag exemption I am only stating that that is what they will ask for on a small place. On the standard form that most will ask you to fill out there will be a place list your last five years of your ag business backed up with your IRS tax records. There are always exceptions especially if you know the right people or go to the right church or coach the right ball team etc etc.
 
Here--- if a place is sold without an ag exemption already in place- you have to wait five years before you can get one.

There are lots of articles on the internet that will outline what you need to prove you are bonifide if the IRS comes calling.
One of the big ones --- if you have no experience--- is getting advice on long term plans from a reputable source- I doubt this place counts :)
 
I am a former tax auditor. For income tax purposes you are assumed to be profit motivated if you make a profit in 2 out of 5 years, however if you can convince the IRS you are truly profit motivated, exceptions will be made. When you talk about Ag tax I assume you are referring to Real Estate taxes and not Income tax. The rules for agricultural land Real Estate Tax vary from one state to another. Here is a link for Texas:
http://www.window.state.tx.us/taxinfo/p ... /land.html
With only 11 acres in such dry country I think it will be difficult to make money with cattle. You will probably lose much more money than you will save on taxes. I understand that farming enables you to write off certain expenses that would not otherwise be deductible, but unless you really enjoy it and believe you will someday be profitable, it is not worth all your time and money. If you enjoy it and plan to continue, contact your extension office and get some training in cattle nutrition. Here is a link to Texas A&M.
http://agrilifeextension.tamu.edu/topics/livestock/
 
Yes I am talking about the real estate taxes and I agree with what you say about making money, but I have also leased 28 achers across the road from me, it helps them with there land taxes also( they are elderly and cant do anything with it).If I cant claim ag, it is possible my land will go from 1200.00 and acre to 6000.00 an acre and that is quite alot at the tax rate I am at. It is a catch 22.I am looking into breaking even money wise with money saved on real estate taxes and having not having to bush hog as much. time will tell if it is worth my time.
Thanks for posting a reply and for the links, I will use them.
 

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