Taxes???

[mhoback]

jt, if you buy cows for breeding, they all have to be depreciated over the same life. However, you can elect to take Section 179 depreciatoin on some cows and not on others.

 

[jt]

jt, if you buy cows for breeding, they all have to be depreciated over the same life. However, you can elect to take Section 179 depreciatoin on some cows and not on others.

yes, i know they all have the same life and the 179 election, but what if i didnt want to depreciate but half of my cows.. can i choose to not depr the other half and keep their basis at the purchase price?

jt

 

[mitchwi]

jt, if you buy cows for breeding, they all have to be depreciated over the same life. However, you can elect to take Section 179 depreciatoin on some cows and not on others.

yes, i know they all have the same life and the 179 election, but what if i didnt want to depreciate but half of my cows.. can i choose to not depr the other half and keep their basis at the purchase price?

jt

If they were all purchased you depreciate it. You either use it or lose as we like to say.

For a generic example - you pay $1000 for a cow, could depreciate over 5 years. If you do not take the depreciation and on year 6 you sell that cow for $800...now your thinking yeah, now I get a $200 loss.......WRONG, IRS says, depreciation was allowed or allowable, you have an $800 gain.

USE IT OR LOSE IT.......

 

[Arnold Ziffle]

jt, I would just add a few comments to the other correct responses you received: you or your accountant can really fine tune your depreciation deductions if you deem it to be appropriate and "tax-wise" under your particular circumstances. You can consider taking Section 179 depreciation on anything from zero to 100% of your otherwise qualifying property additions (it is not an "all or none" situation); you can consider using straight line depreciation rather than the faster allowable rates; you can consider depreciating cattle over 7 years, rather than 5, if you elect under the ADS depreciation system. Fine tuning of that sort could be appropriate in many situations and is certainly more preferable than simply not claiming depreciation on certain animals, since the previous posters were correct in mentioning the "allowed or allowable" rule. Note that you do not claim depreciation on animals purchased for resale (i.e. inventory), nor on animals not yet placed in service by the end of the year because they are too young to be of breeding age. Get with a CPA that knows farm & ranching tax rules

 

[jt]

i guess when the irs regs say breeding stock, i always (maybe erronously) took that to be seedstock stuff.. but every cow that breeds i guess could fall into that class. i have bought some cross breeds and terminally bred them and didnt really consider them "breeding stock". and i have bought some cows and sold them in the same year.

to me, just because a cow will breed, doesnt mean she is breeding stock.. i guess i have had a seedstock mentality on that issue.

i guess to get all the write offs that are due you, you would have to depreciate every one of em and take even a few months of depreciation on those you turn within a year.

that will make for a lengthy 4797..

thanks mitchwi..

jt

 

[jt]

thanks AZ.. i posted about the same time you did. i think i am getting close on this, but like you say, there are some issues that has to be more finely tuned.

i basically run 2 types of herds.. a small seedstock herd and another commercial herd that i will add to anytime i run across a cow that i think i can make money on. sometimes i keep these cows a few months, and some hang on for a few years. it seems like there would have to be a time period in there somewhere to qualify one for inventory/resale.

like you say, i need to find a good cowman cpa to make sure i get on the right track.

jt