Time to make Implement Purchase before Jan 1 st.

[sweettractors]

My accountant friend says, You still have till Jan 1st to make a farm/business implement purchase and deduct or depreciate it on your 2010 income taxes as a Capital item expense for your farm/business. Must file schedule C or F and use the tool in that enterprise. We can take your order up to Jan 1st and ship when you tell us to ship. Ken Sweet

 

[qball98]

Are you sure about that? My accountant asks for the purchase date and the date the item was placed in service. They use the placed in service date to decide when the depreciation starts. This is the way I have been doing it for both my business and my farm. I am not sure what would happen if you were ever audited and they found out you did not even have the piece of equipment when you started depreciating it. I don't know if this is right or wrong but this is the way I have been doing it.

 

[MtnViewRanch]

Are you sure about that? My accountant asks for the purchase date and the date the item was placed in service. They use the placed in service date to decide when the depreciation starts. This is the way I have been doing it for both my business and my farm. I am not sure what would happen if you were ever audited and they found out you did not even have the piece of equipment when you started depreciating it. I don't know if this is right or wrong but this is the way I have been doing it.

I may be wrong, but I believe that stuff is different for this year only. Like 1 year full depreciation , not sure, I don't have any $$$$ to spend anyway, so it doesn't make any difference for me.

 

[greg_g]

Makes no sense, unless a typographical error. You posted "on your 2009 income taxes" which - without an extension request - should have been filed back in April. I'm thinkin' you meant to type "2010 income taxes".

But I'm with Q-Ball. Why start the depreciation clock before you even put the thing in service? Unless you know up front that you're not going to have it long enough to complete the 5 year or 7 year depreciation schedule........

I ordered a model year 2011 John Deere tractor a couple months back, but don't anticipate delivery till at least January. I didn't put down any money up front, my trade-ins being the down payment. As such, I've got no plans of filing an amended 2009 return. Before I complete the 1040/Schedule F for 2010, I'll reclassify the trade-ins as "sold", and add the 2011 John Deere to the depreciation schedule.

//greg//

 

[sweettractors]

Makes no sense, unless a typographical error. You posted "on your 2009 income taxes" which - without an extension request - should have been filed back in April. I'm thinkin' you meant to type "2010 income taxes".

But I'm with Q-Ball. Why start the depreciation clock before you even put the thing in service? Unless you know up front that you're not going to have it long enough to complete the 5 year or 7 year depreciation schedule........

I ordered a model year 2011 John Deere tractor a couple months back, but don't anticipate delivery till at least January. I didn't put down any money up front, my trade-ins being the down payment. As such, I've got no plans of filing an amended 2009 return. Before I complete the 1040/Schedule F for 2010, I'll reclassify the trade-ins as "sold", and add the 2011 John Deere to the depreciation schedule.

//greg//

Typo--I edited the post. sorry, Ken Sweet

 

[mooseracing]

I may be wrong, but I believe that stuff is different for this year only. Like 1 year full depreciation , not sure, I don't have any $$$$ to spend anyway, so it doesn't make any difference for me.

You are correct, I received an email from Dell, wanting our company to stock up and telling us how we could write it all off now and not have to depreciate it over the regular course.

 

[glinke]

Since I do taxes for a living, I feel qualified to comment here.

The deduction referred to here is called the Section 179 deduction. For 2010 it lets you write off the entire value of certain items placed into service in 2010 up to a maximum of $250,000 or the net profit of the business excluding the 179 deduction. In other words, if the farm only made $3.00, you can only write off $3.00. If the farm lost money, you are out of luck for this deduction.

Also, if you sell or dispose of the item before it's depreciation would have normally run its course, you will have to recapture (recognize as income) any "excess" depreciation.

Here's an example. I buy a 2005 F350 in 2010. It cost $25,000.00. I have $30,000.00 in net income. I can deduct all $25,000.00. If I sell the truck (a five-year item) in 2011 for $23,000.00, I will have to show $18,000.00 in income in 2011. That is the $25,000.00 I took in depreciation less the $5000.00 that I would have been allowed had I not chosen to write it all off the first year.

If you are going to keep the item a long time and have the income to shelter, it is a great idea. As with most things in the world of tax, beware. They print the money and they want it back!:ashamed:

 

[sweettractors]

Since I do taxes for a living, I feel qualified to comment here.

The deduction referred to here is called the Section 179 deduction. For 2010 it lets you write off the entire value of certain items placed into service in 2010 up to a maximum of $250,000 or the net profit of the business excluding the 179 deduction. In other words, if the farm only made $3.00, you can only write off $3.00. If the farm lost money, you are out of luck for this deduction.

Also, if you sell or dispose of the item before it's depreciation would have normally run its course, you will have to recapture (recognize as income) any "excess" depreciation.

Here's an example. I buy a 2005 F350 in 2010. It cost $25,000.00. I have $30,000.00 in net income. I can deduct all $25,000.00. If I sell the truck (a five-year item) in 2011 for $23,000.00, I will have to show $18,000.00 in income in 2011. That is the $25,000.00 I took in depreciation less the $5000.00 that I would have been allowed had I not chosen to write it all off the first year.

If you are going to keep the item a long time and have the income to shelter, it is a great idea. As with most things in the world of tax, beware. They print the money and they want it back!:ashamed:

If I understand this correctly, If I farm or run a farm or Business and I buy a implement that costs $1000 before the end of the year, I can take the section 179 election to expense the entire $1000 on 2010 tax return. This is provided I show at least a $1000 profit in that business or farm enterprise? If I keep the implement for 15-20 yrs, theoretically, the gumment actually will pay for the implement. Is this good tax policy for people who have 2 wage earners in the family or have income they need to shelter or substantially defer? Ken Sweet

 

[glinke]

Ken,

Good tax policy is a matter of opinion but I would say that this can save some people a boat load of money, especially since the reduced net profit on the Schedule C or F also reduces self-employment tax!

Gayle Linke, EA

 

[sweettractors]

Ken,

Good tax policy is a matter of opinion but I would say that this can save some people a boat load of money, especially since the reduced net profit on the Schedule C or F also reduces self-employment tax!

Gayle Linke, EA

I know people that have 2 wage earners in the household and over the years, The gumment has bought all their farm equipment, considering tax and SE taxes saved when filing a schedule C or F. Ken Sweet