Bred Replacement Heifers Qualify for Bonus Depreciation
We had a reader ask the following question:
“I am new to cattle farming and purchased bred replacement heifers in 2010, can I take the 100% bonus depreciation on them?, as they are “New” (never calved before)? Alternatively, what would be the best type of depreciation method to apply to heifers to maximize my depreciation for 2010 and possibly 2011?”
Heifers that have never delivered a calf before and are newly purchased from a rancher will qualify for bonus depreciation (50% before September 9, 2010 and 100% thereafter until the end of 2011). The farmer that raised the heifer is sort of like an equipment manufacturer. The heifer is part of their inventory and once it is ready to be bred, it is now a new heifer ready to be put into use by the cow/calf operator. It is like the equipment manufacturer building a combine and selling it to the farmer to start harvesting corn. Thus, the heifer can be depreciated using the bonus depreciation rules in effect based upon the day placed in service (normally the day the heifer was purchased).
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
Will the 100% bonus depreciation apply for bred heifers in 2012 or will it be 50%? I qualify for this tax break and am looking for well needed tax deductions after cashing in some mutual funds this year. Thank You – Ray