Equipment depreciation guidelines.

[woodmills1]

the way i understand it is since you have already in effect depreciated the first tractor 100% you would have to go into the depreciation tables and find out what % you would have been allowed, up to the year you traded the tractor. and use that to find the dollar amount that you would not yet have depreciated. that unallowed amount would then be subtracted from the cost of the new tractor to find its depreciatable value. i do not know if there is a penalty for this. i also believe that if you did not trade or traded down the difference would be reported as income, since the unallowed amount was used to reduce income originally. I have used the 179 for all of my major equipment purchases, like planers, dump, dozer, mill, tractor and processor, but have yet to sell or trade before the class life is up. the problem could be more complicated than i have sugested because of the difference between the trade in value and the depreciated value. ordinarilly if you sell equipment you must report it as income so i think above when i said the cost of the new tractor it should probably be the difference between the cost of the new and the trade in value of the old.

 

[cowboydoc]

Unaka,
Yes I got your email. Sorry our all in one at the office went bye bye today. I had to go get a new one today after work and spent the last few hours trying to hook it up. I should have it going tomorrow. I'm not the computer ace that Harv is.

As far as cattle go yes I sell quite a few privately. What I do is sell them on the hoof. I have several people that buy from me that way. The way I do it is when they are ready to go I will load them and go weigh them. Then I take them to the butcher for them and they pick them up there. I just have the different people make arrangements as to what they want the meat cut like. When they pick up their meat they pay the butcher for his work and give him my money for the cow. Works out good for both of us. I keep him busy and he handles the money for me before the beef is picked up.

My cows I finish out on a corn and protein supplement with alfalfa. I'll bring them up gradually to full feed. Meaning they have all the corn and protein they can eat. As soon as they're finished out is when I take them to the butcher. It's not a whole lot more than what the sale barn pays but I save commissions and a little more. I usually will charge 10% above what the avg. steer or heifer for that weight was.

Look for that bp tomorrow and let me know if I can help you anymore on the cattle deal.

 

[Harv]

<font color=blue>I'm not the computer ace that Harv is.</font color=blue>

Seems like I've got a lot of people fooled.

Cool. /w3tcompact/icons/cool.gif

 

[unaka]

Woodmills,

I see the logic, now, regarding the taxes. From what you've said, it sounds like I won't really be penalized per say, especially since I had to put more money down and upgraded rather than down graded tractors. However, I need to read up some more on the regs because, as you alluded, there are some complications.

Cowboy Doc,

Thanks for your reply. I look forward to receiving the bp. DFB pointed me to some obscure, but excellent old posts last night regarding cattle, marketing, slaughtering, etc. Thanks DFB, I'd have never found those on my own.

I was telling a friend this morning about image viewing, editing, etc. He couldn't believe I learned all that from a TRACTOR WEBSITE!!

Keep up the good work, folks, and thanks Muhammad for creating such a professional, and family friendly forum. /w3tcompact/icons/clever.gif

Unaka

 

[Hillbilly]

Richard,
What kind of cattle do you raise,and how many?I stay busy enough with 93 acres,how do you manage to keep up with 3 places and run your medical practice at the same time?How many horses and what kind?I could get a lot more done if it were not for tractorbynet./w3tcompact/icons/smile.gif

 

[cowboydoc]

Hi there Hillbilly,
It takes ALL my time pretty much. If I'm not here at the office I'm out there. I do have a retired farmer that works for me so that helps alot. I'm down to 156 head of cattle right now and mostly have crosses. Herefords and black baldys for the most part. As far as the horses go I've got about 30 of them. Most are broodmares, yearlings, etc. I've got 13 broomares, my two studs, and then our roping horses. It's a full-time job and then some but we all help out and it works good. I complain about all the work sometimes but i really wouldn't have it any other way! I raise mostly quarter horses. You can see some of them at the new website. www.4lranch.net. I don't have all the mares up yet but should soon.

 

[Wingnut]

Richard,
since you've investigated the 179 in depth ... maybe you can answer this before I finally get home at midnight and can start digging into the code.
I bought a laptop to use strictly fo rbusiness and it falls under the 179 definition ... except fo rone thing ... I thought I'd bought it in 2001 but after digging through my records I discovered it was actually in 2000.
I've seen several posts that say "purchased in the current year" and was wondering whether that's interpretation or hardcoded in the definition?

thanks

peter (who is always happy to keep his hard earned dollars out of the hands of the porkbarrellers in Dolt Country)

 

[cowboydoc]

Wingnut,
Boy now that one I'm not sure of. I've never had that come up. I always take all my deductions in the current year. Sorry I can't help more.

 

[PaulT]

ONe thing you can do is "sell" it to yourself. I have transferred personally owned assets to my company in the past, which constitutes "purchasing in the current year" from the point of view of the company. My accountant validated this approach, as he keeps my assets in a computer program that calculates my depreciation each year. To be exact, you would depreciate the value of the computer "used" during 2000 right after you bought it, and transfer the asset at that slightly depreciated amount.

Of course, you could always file an amended return for 2000 and claim it in the year that you bought it! The IRS allows amending your returns for several years, though I'm not sure how many. You can also use any active losses incurred in the current tax year to amend prior years and actually get retroactive refunds! My accountant got me 3 grand that way after the first year of running my small business (at a startup loss), right after several years of large paychecks and no mortgage (i.e. tax shelter)/w3tcompact/icons/smile.gif woohoo!

 

[Wingnut]

Unfortunately, Richard ... I'm slowly learning the difference between the Canadian and American tax codes. Until Bird mentioned the deduction for the computer he took to work, I'd never ever really thought about the laptop I bought ... I just decided it would enable me to work during all those wasted hours on business trips and enable me to easily move project data between my office workstation and home workstation, etc. I hadn't thought about tax implications when I bought it .. so never worried about it ... but this whole "179" discussion gave me an idea to retrieve a few dollars from the "failed social experimentation fund".
I guess, rather than flag my return for a possible audit ... I'll just forgo this deduction ... but keep it in mind for the next time I make a work-related purchase.
Thanks for the input.

(Drooping)Wingnut