Taxes&Cattle?

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wideurt

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Ibought10heifers last year to get in the cattle buisness&a tax deduction. Went $ talked with my tax lady she said they were not deductable because they were not bred yet.Do I have to say I bought 10 cows. How does anybody buy heifers for replacement if you have to count that money as incme.That does not work.I know I need a new tax person,anyone know of a good one central part Mo.
 
The simple answer is get a new tax person that understands farm taxes.

MD
 
If you had told her that you bought 10 cows she probably wouldn't have raised an issue with you. But when you mention heifers your tax lady has to consider whether or not the heifers were placed in service by 12/31/06 since they must be "placed in service" in order to be depreciable for tax purposes. For cattle that are not "cows" the term "placed in service" generally means that they were bred by the end of the year or at least they were of an age such that they were sexually mature and capable of being bred. Did you have them running with a bull, or AI'd, by year end?
 
No.They won't be ready till April.I just thought they would be a good tax break. So I guess I have cows.
 
Heifers or cows that will be kept for breeding to raise calves can't be used as a deduction . they must be depreciated , I bought some cows a few years ago I think we did them for 5 or 7 years. You should be able to start depreciating them right away whether they are bred or not. I'm pretty sure I did.
 
Here are some quotes from the IRS farm tax guide.



Livestock. Livestock purchased for draft, breeding, or dairy purposes can be depreciated only if they are not kept in an inventory account. Livestock you raise usually has no depreciable basis because the costs of raising them are deducted and not added to their basis. However, see Immature livestock under When Does Depreciation Begin and End, later for a special rule.


Immature livestock. Depreciation for livestock begins when the livestock reaches the age of maturity. If you acquire immature livestock for draft, dairy, or breeding purposes, your depreciation begins when the livestock reach the age when they can be worked, milked, or bred. When this occurs, your basis for depreciation is your initial cost for the immature livestock.
 
wideurt":2b5vltf4 said:
So the I.R.S. gets you coming & going.

No they don't this is a business like any other not a free ride to get out of paying taxes.
If you have legitimate expenses you can deduct it from the bottom line.
You wrote the expense of the purchase of the cow off you wrote the expense of the cow and calf off in feed, taxes, upkeep etc. You have written off all the expenses on an animal you didn't buy so there is no further write off. The idea is to make money, you will never spend your way to saving money by getting back at most 33 cents on a dollar spent.
If you looking for a tax shelter invest in municipal bonds.
 
Does a Retained heifer that say raises 3 calves and then dies at 5 do you get a write off then? Or does she never show any tax break besides the feed and up keep that she requires?
 
aplusmnt":z85m483d said:
Does a Retained heifer that say raises 3 calves and then dies at 5 do you get a write off then? Or does she never show any tax break besides the feed and up keep that she requires?

Again no as you have written off all cost of the retained heifer as upkeep.
The retained heifer has no value to deduct unless sold or bought.
Your trying to double dip.
 
Caustic Burno":1nwcuvsj said:
aplusmnt":1nwcuvsj said:
Does a Retained heifer that say raises 3 calves and then dies at 5 do you get a write off then? Or does she never show any tax break besides the feed and up keep that she requires?

Again no as you have written off all cost of the retained heifer as upkeep.
The retained heifer has no value to deduct unless sold or bought.
Your trying to double dip.

Kind of makes more since on the value of buying heifers vs retaining them then. If they are retained they would be a financial risk up to the point that they would be depreciated if you bought one instead, not just a risk to the point they have their first calf.
 
Double dipping? Where do you figure its a double dip.You buy an animal to raise animals its an expence.(should be deductible).You buy feed to feed the animal its an expence(that is deductable)All the tools you need to work your animals is a deductible expence. There is no double dipping .It is moneys spent to try and make a lil money . You know what I mean .Money spent Money earned. It should be that simple.
All moneys spent but no moneys earned Should equal DEDUCTION.
 
wideurt":28tyqe60 said:
Double dipping? Where do you figure its a double dip.You buy an animal to raise animals its an expence.(should be deductible).You buy feed to feed the animal its an expence(that is deductable)All the tools you need to work your animals is a deductible expence. There is no double dipping .It is moneys spent to try and make a lil money . You know what I mean .Money spent Money earned. It should be that simple.
All moneys spent but no moneys earned Should equal DEDUCTION.

I can tell you are really new you are going to have a long row to hoe with this thinking and some high priced lesson's. You write off the cow that you bought you write off the feed and upkeep on the retained heifer you have written all the cost off . You have written off all the cost of running the business there is nothing left to write off. The heifer in you pasture has no value as all of her expensess have already been written off in raising the heifer. When you sell the heifer it goes in the profit column and the buyer in the expense column to be depreciated.
Trying to claim a value on a retained heifer is double dipping the IRS will catch that one as well if you are not turning over cattle for sales it will come a hobby in a few years.
 
wideurt, I'm confident that CB was initally referring to a question posed by "apusmnt", concerning whether or not some sort of tax deduction was avilable in the case of the death of a raised cow; and CB correctly concluded that there is no such tax deduction available -- that to allow a deduction for the pre-death value of the animal (or of the cummulative costs of raising it) would in fact be "double dipping" since in fact every single dollar of out of pocket cost previously incurred in raising the cow had already been deducted for tax purposes. Many people incorrectly think that since they have an "economic loss" they are entitled to take a tax deduction upon the death of a raised animal -- not so! Another example of a frequent mistake is in the case of death of a purchased animal for which the owner has already written off the cost of the animal via depreciation deductions. Once again, there is no tax deduction available upon the death, since the entire cost (at least in my example) has already been deducted in prior years as depreciation expense.

Based on what you indicated in your earlier posts, you can at least take some comfort in knowing that you will be able to begin depreciating your heifers for tax purposes in 2007 -- and if you meet the "earned income" limitations of Section 179 your tax lady will probably be able to essentially deduct the full cost of the heifers in 2007 (as depreciation expense) if you so desire
 
Really make a person look hard at retaining heifer then. You would have say $1,000.00 in a retained heifer by loosing the $500.00 sale price of her and then say $500.00 to get her to calving time. Then she dies at Calving and you have no deduction from her as a loss.

Versus you pay $1,000.00 for bred heifer and she dies at calving and you can deduct that $1,000.00 purchase a few months earlier as a loss. And if she lives you have an extra calf out of her versus the retained on.
 
I understand that you can only deduct once. If you took the deduction for the price of the cow that part is done. If she dies you lost a cow,if you sell her you made money.What I not understanding is if I buy 10 heifers for no matter what(calf operation,orto fatten her up & sell)as long as it is buissness,Ishouldn't have to pay taxes on the moneys spent for the heifers it should come off the top of my income.
 
When you buy a mature animal, of breeding age or bred, you can count them as a cost right. Like say I go and buy 10 bred cows, I can deduct them from my profit, right?

Just asking because somehow I have gotten confused and didnt want to read everyones posts.
 
ENNOT":te86dwty said:
When you buy a mature animal, of breeding age or bred, you can count them as a cost right. Like say I go and buy 10 bred cows, I can deduct them from my profit, right?

Just asking because somehow I have gotten confused and didnt want to read everyones posts.

Yep
 
It's alot easier for me to just count them as costs. Like this fall we bought a bunch of short term cows, more than likely they won't be here more than a year or two. It is just easier to count them against my profit from 2006 than depreciate them over a couple of years.
 

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