January, 2016
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Pre-1977 Purchases May Get 100% Step-up or Not!
We had a reader respond to our last post with the following: “One additional thought on the “Farmer Brown purchased 40 years ago” example. If it was a pre-1977 joint interest, his wife could get a 100% basis step up, if the funds to purchase the property and pay for the mortgage came solely from […]
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What Gets a Step-Up
I continue to get questions regarding how much of a step-up in cost basis farmland gets when someone passes away. Again, as with most tax questions, it depends. The key factor for determining the step-up is who owns the land. Is it owned by the person who passed away or is it owned by an […]
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Continued Headwinds for Ag
The Federal Reserve Bank of Kansas City provides several publications throughout the year on trends in the farming sector for their region (Kansas, Missouri, Nebraska, Oklahoma, Wyoming, Colorado and New Mexico). In an article titled “Supply and Demand Fundamentals Weighing on Ag Economy”, it does a good job of outlining the headwinds that Ag still […]
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Mr. Market Wants Its Excess Profits Back
I have been meeting with several farmers over the last few days and we have been discussing how low crop prices will affect their bottom line profit. Mr. Market has a history of allowing excess profits to be earned by farmers (think of the first and second world war, the Russian Grain trade of the […]
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Top 10 Reasons You Might Need Accrual Accounting
I spoke this morning in St. Louis at the Accounting Boot Camp on using accrual accounting for farm operations and why it is important. To start off the talk, I came up with the Top 10 Reasons why you might need accrual accounting: 10. You think working capital has something to do with politicians in […]
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Many Specialty Crops See Drop In Prices Too
It is not just corn, soybeans and wheat that are seeing slumps in prices. Many specialty crops such as almonds are also seeing a drop in price due to an increase in the dollar and reduced demand for the product. A recent article by Valley Public Radio spotlight the issues that almond growers are facing […]
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Planted Vines and Trees Qualify for Bonus Depreciation
It is not often that we post on orchards or vineyards, but one of the new provisions from the tax extenders bill is the ability for orchards and vineyards to deduct 50% of the cost of trees or vines in they year of planting instead of the year the plant is placed into service. The […]
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Relief for Older Farmers with IRAs
The Tax Extenders bill made permanent the ability for older taxpayers to contribute up to $100,000 of their IRA holdings directly to a charity. For many older farmers, this option can save them income taxes. There are several situations where this may help a farmer. We will review three of the options to see how […]
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“BIG” Might Not Be a Problem
Many farmers formed corporations back in the 1970’s and 1980’s and in most cases, they were formed for tax purposes. Over time, these corporations build-up a large amount of deferred grain sales, prepaid farm expenses and other assets that have little or no tax basis (“cost”). In order to prevent a double tax (a corporation pays […]
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Is Section 179 a Ticking Tax Time Bomb?
Most farmers took advantage of up to $500,000 of Section 179 over the last five years. The recent tax extender bill has now made this permanent at the $500,000 level (indexed to inflation after 2015) and it does not start to phase-out until a farmer invests more than $2 million in farm equipment. On the […]