O/T a bit - tax related on farm equipment

55 50 Ron · Feb 2, 2014

Since tax season is here, if I bought a baler about 15 years ago for $400 and would sell it in 2014 for $700, it looks like I have to pay taxes on the $300 gain.

Is that so? If so, it seems it would be better to sell it for the same as I paid for it and not have to "monkey" with taxes.

IaGary · Feb 2, 2014

I believe you still pay tax on any amount you sell it for because you wrote it off when you brought it.

It was an expense and now it is an income.

Capital gain taxes are paid on items you did not deduct. Ex. Land, your house.

But check with your accountant.

I am not one.

Gary

Anonymous-0 · Feb 2, 2014

Sell it for cash no tax.

JD Seller · Feb 2, 2014

If you depreciated or expensed it then all of the money would be tax able.

Example: Used tractor for $7500. You depreciate it on a five year schedule. So that would be $1500 each year. So if you sold it after the fifth year the full sales amount would be taxable.

Bruce from Can. · Feb 2, 2014

If it is income... they tax it.

Ted in NE-OH · Feb 2, 2014

No tax on any gain in value if you don't sell it.

donjr · Feb 2, 2014

Scrap it and put the cash in your pocket. Even the infernal revenew service won't fight an old, used piece of junk......

Whichester1 · Feb 2, 2014

All of this is going to get worse, the government does not have any money.

Dave H (MI) · Feb 2, 2014

I think you are probably smart enough to figure this one out. IF you are in the business of farming and file a tax return for that business each year then a 15 year old baler is going to have a cost basis of ZERO and the proceeds 100% gain and taxable. IF you are still carrying a fully depreciated asset on the books after 15 years then you would have to make an entry to remove it. This entry correctly would show the proceeds and record the income. An incorrect alternative is to make an entry to "write off" the baler as though it were scrapped and pocket the cash without recording it anywhere. This is a matter between you and your conscience.

IF you are not in the business of farming and you do not file a tax return for a farming enterprise then WHY ARE WE HAVING THIS CONVERSATION????

HTH

Dave H*** CPA

LAA · Feb 2, 2014

If you file a schedule ""F"" the $300.00 is taxable at the long term capital gains rate. It does not matter whether you depreciated the baler or not when bought, if it was bought for a business purpose, the law says ""allowed or allowable"". If you never file a schedule ""F"" then the baler is personal property -- do what you want to with it.

huntingreen2day2 · Feb 2, 2014

Apply the SSS method.

Phil in Pa · Feb 2, 2014

What baler?

littlered1 · Feb 2, 2014

http://www.bls.gov/data/inflation_calculator.htm

I am not a CPA, and am not offering any advice. Check and see how much your 1989 $400 is worth now, and let your conscious be your guide. Looks like to me you are taking a $51 loss.

Creative Accounting 101.

JMS/.MN · Feb 2, 2014

If you depreciated the $400 original cost over the years, the $700 you sell it for is taxed as ordinary income. You already got your $400 purchase value out of it.

Anonymous-0 · Feb 3, 2014

That's what cash is for.

60 acre hillside · Feb 3, 2014

I think it should be considered capital gains, I am no expert but my accountant is. A good accountant is worth the pay!

LAA · Feb 3, 2014

When you sell a fully depreciated asset the price you recieve up to the price you originally paid is taxed as ordinary income, any portion of the sale price you receive above the original price is long term capital gain, so bought for $400.00 --- depreciated --- sold for $700.00 = $400.00 ordinary income at his current tax rate and $300.00 long term capital gain at the current LTCG tax rate. If he did not originally depreciate it then it is $700.00 in his pocket.

Icuby · Feb 3, 2014

Seen on TV Farm show the other morning that if heirs sell inherited farm that there is no tax to pay??

EricInSEI · Feb 3, 2014

On inherited property the tax basis is what the value was when you inherited it. So if you sell it immediately (or later) for the price that the estate valued it at then you have no taxable gain and no tax. If you sell it for more than what the estate valued it at then the difference is taxable.

EricInSEI · Feb 3, 2014

Of course if the person you sell it to depreciates it and is later audited, they will have to show the price they paid. The IRS can then look to see if your records match, and when you don't show a sale that can trigger an audit of your tax returns for something like the last 10 years. Probably won't happen but can.

the flying belgian · Feb 3, 2014

My Grandfather always said "they still don't take 100%"

O/T a bit - tax related on farm equipment

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