For Building to Qualify for 100% Bonus Depreciation It Must Be Complete in 2011
We had a reader ask the following question:
“I put a deposit on a building in Nov 2011 thinking that it would completed and paid for by 12/31/11. The builder has not started the building yet and says it will most likely be completed mid January. What can i do to get the 100% cost deduction for 2012? Could I just pay for it now, or does it have to be 100% complete by 12/31/11?”
In order for a farmer to construct a new farm building in 2011 and be able to take 100% bonus depreciation on the building, it must be completed by December 31, 2011. Usually having the occupancy permit that shows the completion date on or before that date will be sufficient, but in several states, the local county does not issue occupancy permits on many farm buildings.
In these cases, I would try to take photos of the property and get them date stamped and put in some type of file showing that the building was completed. To prove the date, etc., you may want to hold up a copy of the local newspaper showing the date so that there is no question on what date the photo was actually taken.
In this case, since the construction will not be finished by year-end, then 50% bonus depreciation will apply in 2012, not 100% bonus depreciation in 2011. There might be a chance that the construction is of two separate buildings. For example, a machine shop may be one building and a shop located next to the machine shop may be a separate building. If one is done in 2011, it would qualify for 100% bonus depreciation, but this does not appear to apply here.
Merry Christmas to all of our readers and we wish everyone a Happy New Year!
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.
I invested in some crops in 2011 in the form of contact growing.( I pay so much an acre to get it farmed ) then we harvest it and sell it. I keep some of the equipment we use for harvesting on my property. I want to build a Shop to store and work on the equipment. Can I use the expense of the shop to offset the money made off of the crops with the bonus depreciation? One other issue the building will be put up in 2012 and all the profits will be made for 2011. Can I take the depreciation from my 2011 taxes at the 2012 rate? Any info you can give me would be greatly appreciated.