Winter 2016

TEXAS LAND / Lifestyle Issue
“Now’s a good time to check for unreleased liens, so there’s not a
headache or roadblock if you want to get a loan secured by that
property,” Ormiston says.
Bawcum’s experience includes 40 years preparing taxes for landowners,
farmers and ranchers, and eight years on the board of
Legacy Ag Credit, a Farm Credit lending cooperative.
Remember that from the Internal Revenue Service’s perspective,
a legitimate business needs to have some profit potential.
“If you have 1,000 acres and five cows, you’re not going to be able
to show a business plan where you’d be able to make a profit,”
Bawcum says.
3. SHOW YOUR LENDER A WELL-PREPARED TAX RETURN.
If you plan to buy land, tax season is a good time to organize
your finances before talking to a lender. A tax return prepared
by a competent professional can make it easier to demonstrate
creditworthiness.
“It makes a difference,” Bawcum says. “Bankers rely on that document
when determining whether to lend money. They have to look
at your credit history, payment history in the past, ability to repay
the loan from your job or business. If the lender can’t understand
your tax return, it makes the loan harder to obtain.”
Ormiston adds another item to the year-end to-do list: Make sure
that liens have been released on any property that you’ve paid off.
4. KEEP GOOD RECORDS.
Starting with the 2016 tax year, the IRS Form 1098 that lenders
send individual borrowers who paid more than $600 in interest
on a mortgage loan will expand to include the origination date of
the mortgage, the principal balance as of Jan. 1 of the tax year, and
a street address or description for the property securing the loan.
That mortgage interest statement is an example of the records
that support your tax return.
“This is going to make my job a little easier, and will make the
IRS’ job in the event of an audit a little easier,” Bawcum says of
the revised 1098. For example, the form could help distinguish a
primary or secondary residence, for which interest is deductible,
from raw land.
Bawcum adds that professional tax preparation offers taxpayers
some peace of mind because they’re less likely to claim a deduction
that they shouldn’t — or overlook a possible deduction.
“The best way to pay less tax is to keep better records,” Bawcum
says. “Write a check or use a credit card, and be sure you have a
receipt for everything you buy that could be a deduction.
“A lot of farmers do what I call dashboard accounting. They throw
all their records on the dashboard of their truck, and once a year
they clean them up and bring them to me. If you lose some of
your records, it’s going to be difficult to support your deductions
in an audit.”
5. HAVE A PLAN FOR THE FUTURE.
The season of giving is a good reminder to explore your estate
planning and gifting powers.
Thanks to a 2015 change in the Texas Estates Code, there’s now
a streamlined way to ensure that real property transfers to your
designated beneficiaries upon your passing.
“It’s called a Transfer on Death Deed,” Ormiston says. “The property
passes outside of your estate, so your beneficiaries or heirs
avoid the expense and hassle of probate court.”
An online kit from the nonprofit Texas Legal Services Center,
TexasLawHelp.org, includes a free form that you can sign in front
of a notary and file in the property’s county deed office.
Ormiston still strongly recommends consulting an attorney about
something as important as transferring property.
“As long as you execute it properly, it’s a really simple process,”
he says.
Article provided by Farm Credit Bank of Texas
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