AgVentures.Taxes.2007.11.08

AgVentures.Taxes.2007.11.08 - Tax Considerations of Farm...

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Tax Considerations of Farm Transfers Philip E. Harris University of Wisconsin- Madison/Extension
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Alternatives for transferring farm assets p. 1 1. Sale 2. Gift 3. Transfer at death 4. Trade 5. Transferring to a business entity
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Taxes imposed on farmers p. 1 1. Property taxes 2. Sales taxes 3. Employment taxes 4. Self-employment tax 5. Income taxes 6. Gift taxes 7. Death taxes
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Sale p. 1 No gift or death tax consequences But there are income tax and self-employment tax consequences
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Example 1: Cows p. 1 Sale price of cows $130,000 Income tax basis 0 Gain $130,000
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Example 2: Machinery p. 1 Sale price $58,934 Basis - 8,434 Gain $ 50,500
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Example 3: Land p. 2 Sale Price $295,000 Basis 11,800 Gain $83,200
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Character of gain or loss p. 2 Ordinary income (10% - 35%) Capital gain (0% - 28%) Self-employment income (15.3%)
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Three categories pp. 2-3 1. Subject to ordinary tax rates and to self-employment tax
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Example 4 p. 2 Gain from calves is subject to income tax and SE tax Gain from sale of heifers and cows is not in this category
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Three categories pp. 2-3 1. Subject to ordinary tax rates and to self-employment tax 2. Subject to ordinary income tax rates but not SE tax a. Depreciation recapture b. Young breeding stock
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AgVentures.Taxes.2007.11.08 - Tax Considerations of Farm...

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