ASCS Goverment Program ????????? HELP

I put $70,000 worth of tile & grass waterways on a farm that my wife owns in Ohio. One of those goverment programs where the gov pays 90% of the cost. Now my accountant tells me that this is a Capital Expense & needs to be spread over several years deduction. I am telling him NO it is not a Capital Expense & that it should all be taken off on taxes the year it was done. The Gov paid me 70k I paid the contractor 70k. It is a wash. I have farms in Iowa & have installed terraces on similar Gov programs & my accountant has taken the deduction all in one year. I have talked to the ASCS office & they can't give me any rock solid paper work saying YAY or Nay. Where can I look to find paper work clearly stating that it can or can not be deducted all in one year. Help me Please. & Please no comments about go get a differant accountant. Thanks Gerald

It's your money and your taxes. You can do it any darned way you see fit.

Allan

It's your money and your taxes. You can do it any darned way you see fit.

Allan

What did your accountant say when you told him of your previous experience?

Sometimes there are limits to certain expenses that are deductable in a given year. Make him explain the reasons why he"s doing what he"s doing. Remember he"s working for you! If the acountant wont explain his reasoning than I"d say it"s time to find another accountant.

Your accountant is correct - it does need to be depreciated - but only your cost. You paid $70,000 and you were reimbursed $63,000 (90% according to your story). The value to be depreciated is $7,000 (your actual out of pocket expense). If he can't understand that your taxes are too complex for him to do and you need another accountant.

As it was explained to me, if you are renting the farm out to some other operator, it is a capital expense, and it has to be depreciated over several years. If you are actively farming that land you have options. If you farming your land in Iowa and renting out the Ohio land I think your accountant has it correct.

Thanks for your replies. I was hoping I was right but now I know. Thanks Gerald

That is true, but doing it any way he sees fit won't help when the IRS comes. Presumably the accountant was hired to provide an expert on tax law. If all my accountant did was add numbers for me, I sure wouldn't pay her current rates.

It's not got a derned thing to do with the law; he's in compliance as far as that goes.

His accountant wants him to string it out over a period of years to use it down the road. That's fine IF HE WANTS TO and if it works best on the bottom line.

However, if he's got a jag of tax looking him in the face, maybe he wants to take 'er all right now as an offset.

It's his money, not that accountant's.

Allan

I had a similar situation and since it is cash rented rather than share cropped it is treated as a capital expense and depreciated over several years, I believe that mine is 15 years. If you share crop or farm the ground, then it can all be deducted in one year. Allen in NE farms his ground so wouldn't be factor.

How did you get the government to pay 100%? Every program I've ever dealt with was cost-share.

The IRS booklet specifically for agriculture is helpful. I get one every year. It might be 100 pages more or less. It is free.

Here is my take for ground you actually farm:

First, the government cost share payment is all taxable and reportable on your schedule F. This income will be reflected on your 1099 you get from the Farm Service Agency (former ASCS). This is reportable the year you actually get the electronic deposit. Some years I have already paid the contractor for fall work and do not get reinbursed until the next year.

Second, conservation expenses can be deducted. There are limits. I think it is 25% of gross farm income. If you spend $10,000 on terraces you better have $40,000 of gross income. If there was extensive tiling done then that portion could be put on your depreciation schedule. You can carry over to the following year the remainder of the cost if over the 25% of gross limit. Certainly better but probably not 100% necessary if this conservation work is part of your Farm Service Agency conservation plan.

Sometimes when you play income taxes on the cost share and have to build the structures to the Farm Service Agency's requirments (larger) the $ benefit might be questioned by some.

I am surprised that even a non farming landowner with income from rent couldn't deduct 100% of conservation expenses. If you received cost share how would you offset this income without a 100% deduction (to the limits)?? I should go back and read my agricultural tax booklet.

I am interested in how others deal with this issue.

I got a 1099 from the gvt a year ago when they spent some money on a practice so it has to be accounted for. I have never won an arqument with my CPA on these things.