It is important to understand the difference between Capital and Ordinary Gains. The proceeds or gain, from any asset sold is taxed one of two ways, depending on their depreciation status or how long the asset was held. Most appraisals are relevant for up to five years.Ĭlean up depreciation schedules: The first step I take when working with a farmer looking to sell assets is to make sure the depreciation schedule is current and items fully depreciated are still being used in the operation. Having a recent appraisal on your assets will help you when calculating current values for tax purposes and may be needed if called for an audit.
#Poultry farm for sale in missouri update
Update the balance sheet and appraisal: Knowing the true value of all your assets is the first step in deciding which assets to sell. This list can help you begin the planning process, however I encourage you to work with a tax consultant familiar with farm assets that can review your individual information.Ĭommunicate with your lender(s): If you are considering the sale of assets that are held in lien by a lender it is important to communicate with them your plan to sell the asset and determine how the proceeds of the sale are to be applied to the debt. The following suggestions are based on my 30-plus years of working with farm families and my day-to-day working knowledge of the new tax laws. Given the complexity of most farm businesses, having a long-term plan in place ahead of the sale will provide the most benefit to the owner. There are many criteria which will affect individual situations such as volume of assets, depreciation schedules, previous tax strategies and debt structure which all need to be taken into consideration when determining the items to be sold and the timing of the sale. Therefore, it is critical to prepare and plan as far in advance as possible to develop a systematic approach to selling farm assets. Even in situations where a farm is struggling with cash flow or debt repayment, they may find themselves with a considerable tax burden when they sell assets. Given the tough economic drought farmers are facing, many are looking for ways to generate cash and are considering selling non-productive assets, while others may be looking to sell the entire operation. The old adage: nothing is certain except death and taxes rings true for many farmers determining the right time to sell farm assets.
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