Eastern Iowa Farmer Spring 2017

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HigHway 64 auctions Specializing In Farm & Construction Equipment 2017 Sale Calendar March 25 9:00 am June 10 9:00 am August 26 9:00 am December 2 9:00 am Auction Yard Location: 5498 Highway 64, Baldwin, Iowa FRANZEN FAMILY TRACTORS & PARTS, LLC 563-673-6631 Fair prices and honesty have been our trademark since 1976. ContaCt uS today Highway 64 Phone: 563-673-6400 Mike Franzen: 563-673-6631 Dan Powers: 608-439-5764 Scott Franzen: 319-480-3604 http://www.hwy64auctions.com
ecapture income from that trade. Sam Brown trades in a tractor with a $100,000 fair market value for a new tractor. The net present value of the purchase price is $350,000. Sam’s trade-in has a tax basis of zero. Because the transaction is properly structured as a capital lease, Sam can use like-kind exchange rules to avoid recognizing recapture income from the trade-in. Sam can begin depreciating the new tractor with a starting basis of $250,000. If appropriate, Sam can use IRC §179 or bonus depreciation to immediately expense that amount. Sam can also deduct the interest paid yearly under the agreement. Operating Lease Example Contrast the above result with that flowing from an operating lease. Any used equipment offered by the farmer to the dealer as a payment toward the lease price will be considered sold (not traded) to the dealer. Consequently, if the tax basis in the used equipment is “zero,” the farmer must pay ordinary income tax on the value of the tractor traded to recapture depreciation already taken. He will be able to deduct the lease payment, but only over the term of the lease, not all up front. Sam Brown trades in a tractor with a $100,000 fair market value to lease a new tractor (with a value of $350,000) for a four-year lease term. Sam’s used tractor has a tax basis of zero. Under an operating lease, Sam will have sold his tractor to the dealer in this transaction. Consequently, he will recognize $100,000 in ordinary income (no self-employment tax) in the year of the sale because of rules requiring depreciation recapture. Sam will be able to deduct from his income the amount of the lease payment, spread out over the term of the lease, or $25,000 each year (assuming a full calendar year lease term). As with all complex business transactions, producers are advised to consult with a trusted tax professional before entering any agreement to use or acquire farm equipment over time. An arrangement that might benefit one producer might be detrimental to another. The details matter. n eastern iowa farmer photo / Nick Joos Andrew farmer Charlie Peters was one of 1,700 Iowa cattlemen who voted for a state beef checkoff. He hopes the funds generated will help bring a unifying voice to the industry with research and marketing. State checkoff looks to boost Iowa beef industry 50-cent-a-head, refundable fee to start March 1 Charlie Peters is an avid supporter of Iowa Beef and the farmers who dedicate their lives to producing it. That’s why the multi-generational Andrew farmer is excited about the potential changes and growth that could come from the Iowa Beef Checkoff that was reinstated in 2017 after more than 30 years. Cattlemen in the state voted in favor of a 50-cent assessment for each head of cattle sold in Iowa. It will be collected starting March 1. Estimated to potentially bring in between $1 million and $1.5 million a year, the assessment will be used for production research and marketing Iowa’s beef industry. Peters believes the assessment could raise an amount of money that would “unify a voice for the industry.” About 56 percent of some 1,700 Iowa cattle producers voted in favor of the measure in late November. All of Iowa’s producers were eligible to vote. The state checkoff is mandatory for all sellers, but a refund is available if filed for within 90 days, according to the Iowa Cattlemen’s Association. While many cattle producers are eager to see what the designated money will go page 89 spring 2017 | Eastern Iowa Farmer 39
Page 1 and 2: The Eastern Iowa Farmer Spring 2017
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Page 43 and 44: Barbara Reed, a loan analyst with t
Page 45 and 46: The Borrenpohls, Clayton, William,
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an app for that Equine Journal Equi
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Mike and Kale Schmidt move pallets
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Peoples Company is an award-winning
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Eastern Iowa Farmer Spring 2017

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