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Tractor, implements, fencing, etc.

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AggieDave

08-04-2005 07:02:05

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How are purchases of equipment handled? Can they be deducted? If I buy a tractor or a sprayer to use in growing corn can they be deducted? Can any of this be deducted from my "real" job's income?

What about a fence? If I build a fence to keep the deer out of the corn field can the cost of the fence be deducted? What about paint for the fence?...or other maintanence stuff?

Thanks in advance!

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Jrry

08-04-2005 09:45:36

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Re: Tractor, implements, fencing, etc. in reply to AggieDave, 08-04-2005 07:02:05

Bernie Ebbers, CEO of Worldcom (now MCI) is spending a life sentence in prison for depreciating when he should have been expensing.
Actual results may vary, check with your CPA

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John (MO)

08-04-2005 09:02:23

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Re: Tractor, implements, fencing, etc. in reply to AggieDave, 08-04-2005 07:02:05

I'm not an accountant or a tax attorney, I pay people who are. I believe you need to understand the difference between deduct (which I take to mean, all at once) and depreciate (which I take to mean, over time).
I deperciate purchases which I use over time, like tractors, sprayers, and fence. I deduct repairs to tractors, sprayers and fence. Yes I know you get use of the repair over time to, but... that's the way I look at it. You have to realize that if you call the IRS help line, even they only give you the correct answer 1/3 the time. I deduct seed and chemicals, even though some of that seed is still growing me plants year after year. Almost every word of the tax code is open to some sort of questioning. Crazy isn't it?

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Illinois Boy

08-04-2005 10:28:21

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Re: Tractor, implements, fencing, etc. in reply to John (MO), 08-04-2005 09:02:23

If anyone has any receipts they don't need, send them to me - my accountant can use them... : )

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mike brown

08-04-2005 10:49:52

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Re: Tractor, implements, fencing, etc. in reply to Illinois Boy, 08-04-2005 10:28:21

I'm not an accountant either but I under stand tractors and the like are viewed as having value and when you purchased you converted cash to a durable item of equal value so it isn't a deductable expense . The wear and tear of using the tractor decreases it's value and that loss of value is deductible as depreciation. This is 10% per year. Not bad when you cnsider a ten year old tractor is still a valuable machine. Consumables such as oil, filters, tires, fuel, lights, paint etc. etc. are deductable. .... I hope !!!!!

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Ken Macfarlane

08-04-2005 12:11:03

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Re: Tractor, implements, fencing, etc. Canadian In in reply to mike brown, 08-04-2005 10:49:52

The is a very comprehensive but hard to read guide available in Canada for farmers to help them do their own taxes.

Capital Expenses are depreciated (except land)at a rate up to the CCA(capital cost allowance) for the class. You track the value of each CCA class year to year including additions.

Current Expenses are depreciated 100% in the year they occur. So small tools, baler twine, fuel, repairs etc all are expensed that year.

Now the fun is this, if your barn has a shingled roof and it leaks, the repair or materials you use for the repair are a current expense. If you put a metal roof on it, you increase the value of the building and start depreciating the roofing too.

So fixing fence is claimable in current year, building new fence has to be depreciated.

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brian 1

08-04-2005 12:21:35

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Re: Tractor, implements, fencing, etc. Canadian In in reply to Ken Macfarlane, 08-04-2005 12:11:03

So if you completely fix a fence by replacing it... are you repairing existing fence or installing new fence?

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John (MO)

08-04-2005 14:41:19

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Re: Tractor, implements, fencing, etc. Canadian In in reply to brian 1, 08-04-2005 12:21:35

Guess that would depend on if you want to deduct it all in one year, or spred it out over several. In many many cases it is up to you to make the call, then the IRS will be happy to tell you if you are right or not. Isn't it a wonderful system?

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08-04-2005 13:25:53

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Re: Tractor, implements, fencing, etc. Canadian In in reply to brian 1, 08-04-2005 12:21:35

It sure complicates things when you do like I have been doing and 'replacing' small sections at a time because I cannot stand the expense all at once. Now I have been 'repairing' by replacement. Since I only buy about 100 posts and 2 or 3 rolls of wire at a time it probably would not look too bad saying it is for repairs. My old place is 110 acres and every fence on it was beyond repair. I guess no fence is beyond repair, but in order to repair it I would have had to replace every post and every strand of wire. I guess when you look at it that way I am repairing it....there was an existing fence there. Just how one looks at it and at what point repair becomes replacement. Just save those receipts. I deduct all my oil and filters, batteries, etc (as far as I can remember they all went to the tractors). I pay a CPA to do my taxes and so far he has done right by me and gotten me a fairly decent refund each year.

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Steve KS

08-04-2005 12:56:47

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Re: Tractor, implements, fencing, etc. Canadian In in reply to brian 1, 08-04-2005 12:21:35

I wonder about a lot of this stuff too. As to your fencing question I guess it depends on what you call it - repairing or replacing. I don't believe the IRS ever specifies as to what constitutes replacing. I would GUESS that if a fence has been completely depreciated out, then it would be considered a replacement. In the US, you can download the Farmers Tax Guide from the IRS website (Publication 225 I believe). I'll warn you though, it's a big download and it's not very specific about most things!

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