Farm Succession Planning Series
Family farmers can get tips from Purdue University specialists on business communication and dealing with accounting and legal issues during a succession planning program offered at 10 sites in Indiana.
“Cultivating Strong Indiana Farm Family Relationships for Today and Tomorrow” will be offered in early 2013. The program is presented by Purdue’s Women in Agriculture and Farm Succession Planning teams in partnership with the North Central Risk Management Education Center.
Kelly Heckaman, Purdue Extension educator in Kosciusko County, said Indiana farmers and farm wives have asked educators for advice on handling their family businesses.
“In order to get estate planning started in families, they need to be able to communicate about it. And it’s an emotional topic, so it can be hard to get those conversations started,” Heckaman said. “The workshops will give families ideas on improving their conversations and skills to help them work through their problems and keep their families intact.”
Heckaman said the program is a collaboration between Extension and local communities, as organizers will invite local accountants and attorneys to speak on financial strategies.
The first-session agenda topics are: “A Great Year to Farm: New Farmer Financial Skills,” “The Team Approach: Working Together Through Transition” and “Communicating for Success.”
The second session’s lineup is “Business Structure and Taxes,” “The Truth about Pre- and Post-Nuptial Agreements” and “Managing Conflict.”
Registration is $50 for individuals or $100 for families up to four members. Locally, the program will be offered at the Vanderburgh Co. 4-H Fairgrounds, 201 E. Boonville New Harmony Road, Evansville, on February 19 and 26, from 8:00 AM-12:00 PM CST.
For more information, please contact Purdue Extension-Spencer County at (812) 649-6022 or nheld@purdue.edu. Registration brochures are available online.
Perry-Spencer Crop Day
The annual Perry-Spencer Crop Day program will be held Thursday, February 21 at 6:00 PM CST at the Fulda Sportsman Club. The program will feature Dr. Chuck Mansfield, Purdue Extension Agronomist, speaking on “Wheat Nutrient Management and Drought Effects on Soil Nitrogen”. The program will also feature an update on new fertilizer application regulations affecting farmers.
The cost to attend is $5.00 per person, including the meal, and is payable at the door; however pre-registration is requested by February 14. PARP and CCH credit is available for an additional $10 fee. Two CCH credits will be available in categories 1, 14, and RT.
For more information, or to register, please contact Purdue Extension-Spencer County at (812) 649-6022 or nheld@purdue.edu.
Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
Wednesday, January 30, 2013
Wednesday, September 5, 2012
Drought and Tax Tips
George Patrick, Purdue Extension Agricultural Economics Specialist
CROP INSURANCE INDEMNITIES: SOME TAX TIPS
General Rule: Crop insurance indemnities are generally included in income of the year in which the indemnities are received.
Major Exception: A producer may elect to defer reporting the indemnities as income when received if the producer can show that the damaged crop would normally have been sold in the year following the year of production.
This election to defer reporting indemnities applies to all of the crops for which crop insurance indemnities and disaster payments (if any) were received. A previous 3-year average of more than 50% of the crops affected by the election being sold in the year following the year of production would probably be sufficient to document normal business practice of a producer.
Only indemnities due to physical losses of production are eligible for deferral. Given the increases in corn and soybean prices from planting to harvest in 2012, the 2012 indemnities will be due entirely to physical losses. Indemnities paid by county-basis group insurance are not be eligible for deferral became there is no direct relationship between the indemnity and an individual producer’s yield.
Indemnities cannot be reported as income before they are actually or constructively received. An indemnity received in 2013 for a 2012 crop is reported an income in 2013 regardless of when the producer normally sells the crop. This may cause problems for producers wanting to include indemnities in their income for 2012,
Given the very large number of claims in 2012, there may be significant increase in the time needed to process a claim. The crop insurance agent may be able to indicate the likely time needed for processing. Checking information carefully in claim preparation helps avoid delays in processing.
Expected 2012 insurance claims of over $200,000 require a 3-year audit before this year’s claim can be paid. Help your insurance agent start the audit process as soon as possible and be sure settlement sheets are available.
Be aware of possible Aflatoxin contamination in corn. Crop insurance coverage ends at harvest and does not cover losses in storage. Check and have testing donet, if necessary, before harvest.
Producers should have alternative tax management strategies ready to be implemented depending on when the insurance indemnity is paid.
For further information see IRS Pub. 225,”The Farmer’s Tax Guide,” or contact your tax advisor.
LIVESTOCK PRODUCERS: SOME INCOME TAX TIPS
Many livestock producers are reducing their livestock enterprises because of a lack of forages and high grain prices due to drought. Special federal income tax provisions are intended to reduce impact of distressed sales of livestock in “excess” of normal.
1. I.R.C. § 451(e) allows postponement of the reporting of taxable gains on the sale of additional livestock.
2. I.R.C. § 1033(e) allows the avoidance of paying taxes on the gain realized from the sale of breeding, draft or dairy animals if they are replaced within a specified time period.
Postponement of Reporting Income
Postponement of reporting income from weather-caused sale of livestock may be available to cash basis taxpayers whose principal trade or business is farming and who are located in an area designated as eligible for federal disaster assistance. Sales in excess of a farmer’s normal business practice can be deferred until the animals normally would have been sold.
Example 1. Bill is a cow-calf producer who normally carries his calves over and sells them as yearlings. Because of the drought in 2012 and the lack of forage, Bill sells his 2012 calves in October 2012. Bill could postpone reporting the income from the 2012 calves until 2013.
Example 2. Jane normally raises and sells market hogs. Because of the drought in 2012, Jane sells 1,000 head as feeder pigs in 2012 rather than feed them to market weight and sells them in 2013 as she would do as her normal business practice. Jane could elect to defer reporting the sales proceeds until 2013.
Sale with Replacement Intended
A producer may reduce the size of the herd by selling livestock because of the lack of pasture and forages and plan to reinvest when conditions improve. Reporting the gain realized can be postponed if the livestock are replaced. Only the gain on livestock sold in excess of normal sales can be deferred. If the animals are not replaced, an amended return for the year of sale must be filed. However, producers do have some flexibility on the time and type of replacement property.
Example 3. Jack normally culls 15 of his 100 beef cows annually. Because of the drought in 2012, Jack sells 75 of his cows for a gain of $500 per cow. Jack can elect to not report the gain on 60 cows. If Jack does not reinvest at least $500 in 60 cows by the end of the reinvestment period, generally 2 years, Jack would need to file an amended return for 2012.
For further information, see IRS Pub. 225, The Farmer’s Tax Guide, or contact your tax advisor.
CROP INSURANCE INDEMNITIES: SOME TAX TIPS
General Rule: Crop insurance indemnities are generally included in income of the year in which the indemnities are received.
Major Exception: A producer may elect to defer reporting the indemnities as income when received if the producer can show that the damaged crop would normally have been sold in the year following the year of production.
This election to defer reporting indemnities applies to all of the crops for which crop insurance indemnities and disaster payments (if any) were received. A previous 3-year average of more than 50% of the crops affected by the election being sold in the year following the year of production would probably be sufficient to document normal business practice of a producer.
Only indemnities due to physical losses of production are eligible for deferral. Given the increases in corn and soybean prices from planting to harvest in 2012, the 2012 indemnities will be due entirely to physical losses. Indemnities paid by county-basis group insurance are not be eligible for deferral became there is no direct relationship between the indemnity and an individual producer’s yield.
Indemnities cannot be reported as income before they are actually or constructively received. An indemnity received in 2013 for a 2012 crop is reported an income in 2013 regardless of when the producer normally sells the crop. This may cause problems for producers wanting to include indemnities in their income for 2012,
Given the very large number of claims in 2012, there may be significant increase in the time needed to process a claim. The crop insurance agent may be able to indicate the likely time needed for processing. Checking information carefully in claim preparation helps avoid delays in processing.
Expected 2012 insurance claims of over $200,000 require a 3-year audit before this year’s claim can be paid. Help your insurance agent start the audit process as soon as possible and be sure settlement sheets are available.
Be aware of possible Aflatoxin contamination in corn. Crop insurance coverage ends at harvest and does not cover losses in storage. Check and have testing donet, if necessary, before harvest.
Producers should have alternative tax management strategies ready to be implemented depending on when the insurance indemnity is paid.
For further information see IRS Pub. 225,”The Farmer’s Tax Guide,” or contact your tax advisor.
LIVESTOCK PRODUCERS: SOME INCOME TAX TIPS
Many livestock producers are reducing their livestock enterprises because of a lack of forages and high grain prices due to drought. Special federal income tax provisions are intended to reduce impact of distressed sales of livestock in “excess” of normal.
1. I.R.C. § 451(e) allows postponement of the reporting of taxable gains on the sale of additional livestock.
2. I.R.C. § 1033(e) allows the avoidance of paying taxes on the gain realized from the sale of breeding, draft or dairy animals if they are replaced within a specified time period.
Postponement of Reporting Income
Postponement of reporting income from weather-caused sale of livestock may be available to cash basis taxpayers whose principal trade or business is farming and who are located in an area designated as eligible for federal disaster assistance. Sales in excess of a farmer’s normal business practice can be deferred until the animals normally would have been sold.
Example 1. Bill is a cow-calf producer who normally carries his calves over and sells them as yearlings. Because of the drought in 2012 and the lack of forage, Bill sells his 2012 calves in October 2012. Bill could postpone reporting the income from the 2012 calves until 2013.
Example 2. Jane normally raises and sells market hogs. Because of the drought in 2012, Jane sells 1,000 head as feeder pigs in 2012 rather than feed them to market weight and sells them in 2013 as she would do as her normal business practice. Jane could elect to defer reporting the sales proceeds until 2013.
Sale with Replacement Intended
A producer may reduce the size of the herd by selling livestock because of the lack of pasture and forages and plan to reinvest when conditions improve. Reporting the gain realized can be postponed if the livestock are replaced. Only the gain on livestock sold in excess of normal sales can be deferred. If the animals are not replaced, an amended return for the year of sale must be filed. However, producers do have some flexibility on the time and type of replacement property.
Example 3. Jack normally culls 15 of his 100 beef cows annually. Because of the drought in 2012, Jack sells 75 of his cows for a gain of $500 per cow. Jack can elect to not report the gain on 60 cows. If Jack does not reinvest at least $500 in 60 cows by the end of the reinvestment period, generally 2 years, Jack would need to file an amended return for 2012.
For further information, see IRS Pub. 225, The Farmer’s Tax Guide, or contact your tax advisor.
Wednesday, February 1, 2012
Farmland Assessments Rise Again
Here comes this column topic again: property taxes on farmland are
increasing. The base rate for the assessment of an acre of farmland was $1,290
for taxes in 2011. It will be $1,500 per acre for taxes in 2012. And the state's
Department of Local Government Finance has announced the base rate will be
$1,630 for taxes in 2013.
Farmland is assessed starting with this base rate. It is multiplied by a soil productivity factor, which varies from about 0.5 to 1.3, based on soil type. Some acreage is adjusted by an influence factor, a percentage reduction that accounts for factors such as frequent flooding. The result is the assessed value of farmland. That assessment times the property tax rate, less any credits, is the tax bill.
The base rate is adjusted each year with a formula. The DLGF offers the details on its website, at http://www.in.gov/dlgf/7016.htm. It's complicated, but three of its features tell the story. <Read More>
Farmland is assessed starting with this base rate. It is multiplied by a soil productivity factor, which varies from about 0.5 to 1.3, based on soil type. Some acreage is adjusted by an influence factor, a percentage reduction that accounts for factors such as frequent flooding. The result is the assessed value of farmland. That assessment times the property tax rate, less any credits, is the tax bill.
The base rate is adjusted each year with a formula. The DLGF offers the details on its website, at http://www.in.gov/dlgf/7016.htm. It's complicated, but three of its features tell the story. <Read More>
Wednesday, December 7, 2011
Farm Tax Management Webinar Link Now Available
The link to the recorded version of the Income Tax Management for Farmers in 2011 webinar is now available. If you missed the live version or would like to view all or part of it again, it is available at https://gomeet.itap.purdue.edu/p78322489/. The program can be viewed on any computer with high-speed internet access. Reference material cited in the presentation is available for download at http://www.agecon.purdue.edu/extension/programs/tax_planning.asp.
Friday, December 2, 2011
Upcoming Events - Farm Tax Management Webinar
Farmers preparing for income tax season will have an additional resource to help them sort through tax codes and changes when Purdue Extension offers a free webinar Dec. 6.
Income Tax Management for Farmers in 2011 will run 8:00-10:00 AM CST and is open to interested farmers. Participants will have the opportunity to interact with presenters and ask questions.
"Farmers need to determine year-to-date receipts and expenses for 2011 while there is still time to make adjustments for the calendar year," said George Patrick, Purdue Extension agricultural economist. "The webinar also will address after-the-end-of-the-year tax alternatives."
Those who derive at least two-thirds of their gross income from farming can file their income taxes by March 1 without having to worry about making estimated tax payments, Patrick said.
He and David Frette, a certified public accountant who works largely with farmers, will lead the webinar.
Some topics include deferred income from sales, prepaid expenses, farm income averaging, crop insurance, casualty losses, self-employment tax updates and tax management.
To participate, go to https://gomeet.itap.purdue.edu/tax/ approximately 10-15 minutes prior to the start time and log in as "Guest". A high-speed internet connection is required.
**Note: For those unable to view the program live, it will be recorded for later viewing. The link to the recorded version will be posted on the Gazette as soon as it is available**
Income Tax Management for Farmers in 2011 will run 8:00-10:00 AM CST and is open to interested farmers. Participants will have the opportunity to interact with presenters and ask questions.
"Farmers need to determine year-to-date receipts and expenses for 2011 while there is still time to make adjustments for the calendar year," said George Patrick, Purdue Extension agricultural economist. "The webinar also will address after-the-end-of-the-year tax alternatives."
Those who derive at least two-thirds of their gross income from farming can file their income taxes by March 1 without having to worry about making estimated tax payments, Patrick said.
He and David Frette, a certified public accountant who works largely with farmers, will lead the webinar.
Some topics include deferred income from sales, prepaid expenses, farm income averaging, crop insurance, casualty losses, self-employment tax updates and tax management.
To participate, go to https://gomeet.itap.purdue.edu/tax/ approximately 10-15 minutes prior to the start time and log in as "Guest". A high-speed internet connection is required.
**Note: For those unable to view the program live, it will be recorded for later viewing. The link to the recorded version will be posted on the Gazette as soon as it is available**
Conservation Easements Offer Way to Keep Land for Farming
Landowners who want to ensure that their farmland will be farmed for generations to come can consider a conservation easement to limit its future development even if they later sell the land.
A conservation easement is a voluntary agreement between a landowner and a land trust, a private, nonprofit organization that works to conserve the land. In this type of agreement, the landowner "gifts" the conservation easement to the land trust. The landowner, in turn, benefits from federal income tax deductions.
"Granting a conservation easement means the development rights for the land have been transferred, by a deed, to an organization qualified under Section 501(c)(3) of the Internal Revenue Code, such as a land trust," said Gerry Harrison, Purdue Extension agricultural economist. "The organization holding the easement has the responsibility to see that the land is not developed for other than the landowner's retained purposes, such as agricultural production or perhaps some limited structures such as a homestead." <Read More>
A conservation easement is a voluntary agreement between a landowner and a land trust, a private, nonprofit organization that works to conserve the land. In this type of agreement, the landowner "gifts" the conservation easement to the land trust. The landowner, in turn, benefits from federal income tax deductions.
"Granting a conservation easement means the development rights for the land have been transferred, by a deed, to an organization qualified under Section 501(c)(3) of the Internal Revenue Code, such as a land trust," said Gerry Harrison, Purdue Extension agricultural economist. "The organization holding the easement has the responsibility to see that the land is not developed for other than the landowner's retained purposes, such as agricultural production or perhaps some limited structures such as a homestead." <Read More>
Monday, November 28, 2011
Upcoming Events - "Income Tax Management for Farmers" Webinar
Each year, Purdue Extension and the Purdue Agricultural Economics Department offers Income Tax Management for Farmers, a program covering recent tax law changes and their implications for farmers, farm families, and farm businesses. As in recent years, the program will be offered as a webinar and will be accessible from anywhere with a high-speed internet connection. The program is free-of-charge and will be held on December 6 from 8:00-10:00 AM CST.
To view the program remotely, go to https://gomeet.itap.purdue.edu/tax approximately 5-10 minutes prior to the start time and sign in as "Guest". If you are unable to view the program live, it will be recorded and archived for later viewing. The link to the recorded program will be posted on the Gazette as soon as it is available. You may also email me at nheld@purdue.edu for the archived link.
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