I started a small cow/calf operation this year, separate from my parents farm. I needed to purchase livestock and fencing materials, but I have most of the equipment already. Sit down with your accountant to review the Schedule F requirements first, so you know what the requirements are.
Don't refer to it as a "hobby" if you plan on filing a schedule F for deductions. You need to have a business plan to show that you are farming with the intent of making a profit. Your supposed to show a profit 2 out of 5 years, but even if you never do, you can pass an audit if you can show your trying to make money. If the operation can be proven to be a hobby, where the IRS can show that you can withstand losses without taking action to improve the profit, you would have a problem in tax court.
I would suggest buying the equipment when you have the opportunity to get it at the right price. When you start the farming business, you can then add it to your depreciation schedule. I think the depreciation on equipment is 7 years, as is fencing costs that are capitalized. From what my accountant told me, they want you to list the actual price you paid for each piece of equipment, not the current value. I'm bringing in three tractors and a bobcat that I've owned for many years into the business, and I've purchased some used equipment this year from my parents. I have several other tractors too, but I don't have them on the depreciation schedule as they aren't practical for modern farming and would raise suspision of a hobby farm.
I planted a new field of alfalfa with oats cover this spring, so I was able to sell 200 bu. of oats and 100 bales of straw to show some income. I'm also planning on selling 3 halves of beef from our steers. I'll be able to show a few sources of income on the schedule F, but it will probably be less than what my expenses have been this year due to startup costs.
Cost of breeding stock is capitalized over 5 years, while feeder cattle are expensed in the year that they are sold, live or as meat.
I bought a bull and 5 heifers that will be capitalized over 5 years, and I bought two steers to butcher this winter that will show expense for this year. To purchase the livestock, I took out an unsecured line of credit at the bank with a max of $10k to get an interest rate around 7%. This is about 1/2 the rate of what a loan would be, and it's more flexible, so I can pay back the principal as I want, basically like a credit card, but better interest rate. We're already in a fixed 30 yr. mortgage, so land wasn't an issue now.
We sell tractor parts! We have the parts you need to repair your tractor - the right parts. Our low prices and years of research make us your best choice when you need parts. Shop Online Today. [ About Us ]
Today's Featured Article - Listening to Your Tractor - by Curtis Von Fange. Years ago there was a TV show about a talking car. Unless you are from another planet, physically or otherwise, I don’t think our internal combustion buddies will talk and tell us their problems. But, on the other hand, there is a secret language that our mechanical companions readily do speak. It is an interesting form of communication that involves all the senses of the listener. In this series we are going to investigate and learn the basic rudimentary skills of understanding this lingo.
... [Read Article]
Latest Ad:
2022 John Deere 5045E, 4wd, front end loader and 3rd function with grapple. 120 hrs, 55k new, must sell
[More Ads]
All Rights Reserved. Reproduction of any part of this website, including design and content, without written permission is strictly prohibited. Trade Marks and Trade Names contained and used in this Website are those of others, and are used in this Website in a descriptive sense to refer to the products of others. Use of this Web site constitutes acceptance of our User Agreement and Privacy Policy
TRADEMARK DISCLAIMER: Tradenames and Trademarks referred to within Yesterday's Tractor Co. products and within the Yesterday's Tractor Co. websites are the property of their respective trademark holders. None of these trademark holders are affiliated with Yesterday's Tractor Co., our products, or our website nor are we sponsored by them. John Deere and its logos are the registered trademarks of the John Deere Corporation. Agco, Agco Allis, White, Massey Ferguson and their logos are the registered trademarks of AGCO Corporation. Case, Case-IH, Farmall, International Harvester, New Holland and their logos are registered trademarks of CNH Global N.V.
