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Senior Contributor

Re: $1 million: Quarter, hog sites or Jamba Juice?

BA,

 

Me thinks there might just be a bit of a pirate lurking somewhere inside of you.

 

Besides, the friendly boys and girls at the IRS have long since devised 10 ways to Sunday how to uncover irregular or unusual cash flows for all those folks who appear to be living above their means. For those who do such things, a big “Bozo No No” is oftentimes called by some very unhappy federal and state bean & sock counters. Smiley Tongue

 

Render unto Caesar that which is Caesars...or get ready to take the serious licks that only Caesar and his closest pals can give.

Matthew 22:21

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Honored Advisor

Re: $1 million: Quarter, hog sites or Jamba Juice?

BA,  there is nothing in the "taxable" income sector that is highly profitable...... say 20%+ on investment.  Nothing even close to inflations affect on stock value or land values.  That income does not get taxed until sold generations later.... and then at decreased rates.

 

Once in a while we will see 0 income for a while.... to reshape our values and make us reconsider how good it is to have just a little income.  Smiley Happy

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Honored Advisor

Re: $1 million: Quarter, hog sites or Jamba Juice?

SW, how is new equipment ever afforded.  I`ve never been in the predicament but a new $600,000 combine....let`s be honest, there`s no way it can be run over enough acres to paid for it.  No, that combine is bought by a rich guy to delay taxes and fuel his ego. The $600,000 combine is traded and sold and if the second owner is lucky, it might pay for itself after that first slug of depreciation. 

 

If you work with a good accountant, they`ll say "do you want to pay taxes this year, a little or none?"  So, maybe a farm or business would make 20% profits if they didn`t buy new stuff and didn`t section 179 equipment.  *I don`t mean this area this year with $3, 150 bushel corn on the way...but rather on most years   Smiley Happy

 

Then there`s "economy of scale"  who some say tops out at 4,000 acres, I necessarily don`t believe that.  For example Walmart or Amazon will always have the ability to sell cheaper than Ace Hardware or Hardware Hank.   And with farming, if you deal with the owner of Wyffels Hybrids company, you`ll get a better deal than dealing with the farmer/dealer or DSM

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Honored Advisor

Re: $1 million: Quarter, hog sites or Jamba Juice?

Hey Packard, they say that a cop and a criminal have their brains wired similarly, it`s just one chooses good and one chooses evil   Smiley Happy   But when I see a magician on stage cut a woman in half, I wanna know how it`s done!   Smiley Happy

 

I see, farms that have done some impossible things in the last 10yrs, gravity defying things that could only be done by some how not paying taxes.  Nobody`s talking either, beyond "they put their nose to the grindstone, got 20% better yields on 20% less inputs and marketed 20% better than everyone else" .  No, if you do that, Uncle Sam takes 1/3, if you buy stuff to legally avoid that 30% kick in the groin, then you don`t have the money.  You can`t have your cake and eat it too....but some do!   Smiley Happy

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Highlighted
Honored Advisor

Re: $1 million: Quarter, hog sites or Jamba Juice?

No critic here..... but it's just math.

 

At 24 cents per bushel that is 500K bushels of corn per year over 5 years--------- that is only 2500 acres per year.  It can do it.

 

And for fams less than 2500 acres ------- for 36 cents per bushel you can  hire someone else to harvest it provide combine, cart, tractor, truck and labor.

 

What is lost is the ability to work up the way this guy did.

 

harvest.jpg

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Honored Advisor

Re: $1 million: Quarter, hog sites or Jamba Juice?

But that`s just to own the machine is $48/acre for 200bpa corn whether you have it or not...if it`s drowned out, hailed out or prevent plant John Deere Financial still wants their annual payment in January.  Then you have to buy fuel and a man to run it, I know it`s fun but your time opportunity is worth something if you run it yourself.

 

For $40 an acre you can hire it custom harvested, chopping cornhead and that includes a operator plus fuel.   If it`s prevent plant one year, it costs you nothing in combine expense.  If you raise 250 bushel per acre it`s still $40/acre, if a lightening bolt act of God hits the combine, it`s not your problem.   All you have to do is stoop over with your thumbs in your suspenders and look for grain loss and complain if there`s any at all.

 

https://www.extension.iastate.edu/agdm/crops/pdf/a3-10.pdf

 

 

Harvesting, Drying, and Hauling Grain
Average Charge
Median Charge  Range
Number of Responses Corn combining, / acre $34.80  $35.00 $20.00 - $50.00 84    - with chopper head, / acre 38.80 40.00 22.00 - 60.00 53 Soybean combining, / acre 34.00 34.00 20.00 - 50.00 69    - with air reel, / acre 35.35 35.00 26.00 - 47.00 30    - with draper head, / acre 38.65 38.00 26.00 - 59.00 56

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Honored Advisor

Re: $1 million: Quarter, hog sites or Jamba Juice?

BA 

 

Second comment

 

I gaduated college with a BS Smiley Happy  in Accounting, some gaduate work and took the cpa test.  Turned down a second interview with an accounting firm to go back and enjoy the dream with the guy on that tractor.  Money should not drive the important personal decisions, that once I made the right decision.

When I left school I was convinced the IRS would become more restrictive on farming's ability to slide income from year to year and expenses from year to year......... I was wrong..

It just got better and better. Especially for farms with steady growth in either acres or production.  The cpa I use now (a former classmate) kept repeating for years "you really need to show some income, it will catch up with you". I understand his comments, but the US tax policy has been scaled to encourage investment for so long it has become a national addiction fueled by federal spending.

Not sure a farmer ever has to pay high income taxes until he begins to retire.  With planning maybe not then unless there is outside income that forces it.  And the inflation net worth growth of land values and personal investment can be passed generation to generation with minimal tax.  Until it stops with a fool who wants the cash in hand an then the rate is not enough to discourage cashing in.

 

The W-2 worker in the US still carries the bulk of the income tax burdon.  As inept as the voter has become in electing good, knowledgable representatives, I doubt the tax code will ever get updated.  W-2 workers don't fund elections.  Same as W-2 immigrants won't get any revisions to immigration laws or foreign worker laws.

 

What kills democracy is diminished education and lack of participation.

 

Honored Advisor

Re: $1 million: Quarter, hog sites or Jamba Juice?

Sw, I don`t want to treat you like the only doctor at the party, running all health ailments to receive a free diagnosis, so you don`t have to answer....Smiley Happy  But.

 

There`s a guy with a struggling LLC business, it has very few assets, his wife owns the building and rents it to the company.  Since the business sees the handwriting on the wall that the end is near, the president/owner is selling off company equipment and personally pocketing the money.   Now what kind of hot water is this president/owner in when this catches up with him?  Him and his wife are the only owners, but there are creditors.   Would this be considered "embezzling"? 

 

 

Just my thoughts as long as he "pays income tax on embezzled money" and if the creditors call his notes, he has the money to cover them he might be okay.

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Veteran Advisor

Re: $1 million: Quarter, hog sites or Jamba Juice?

SW  -  Your  2nd  to  last  paragraph  pretty  well  puts  a  ''  Wrap  On  It  ''  -  Signed  ,  Sealed,  Delivered    -    -    - 

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Honored Advisor

Re: $1 million: Quarter, hog sites or Jamba Juice?

K-289, I know I`m slow but I still see it (avoiding taxes) as "spending yourself rich".  If I am going to owe $50,000 in taxes, I go to the John Deere dealer and buy a $50,000 tractor (the oldest cheapest on the lot) and section 179 it and I owe no taxes that year....that`s great, but if I had to borrow money to buy the tractor, then I spend the next 5 years making payments on a tractor for 5yrs with AFTER TAX DOLLARS...whooo hoo, way to get rich and "beat the system" ….not!     Just pay your damn taxes and buy a $1,000 Farmall M being as that`s all you can really afford.

 

Or If you owe $50,000 in taxes you buy a $50,000 tractor at John Deere and tell your tax fixer outer "Oh no, no damned section 179 for me, put it on a depreciation schedule"   Okay "what month did you purchase it?"    " Noveeeeember….ish"  it was really December Smiley Wink but you know.   "Okay, I can depreciate it over 84 months and you owed it 2 months so $595 a month and you bought it in November...right? so 2 months of depreciation this year so $1190 this year and you owe $48,610 in taxes"....Okay that`s when I start swearing breaking out words many of you never heard....I owe $48,000 in taxes and I just bought a damned $50,000 tractor that I didn`t need that now needs a new clutch and injectors!!!

 

  So off to the banker in an emergency meeting and get $48,000 to pay my damned taxes and park the $50,000 tractor in the grove until I have the $10,000 to fix it....I didn`t need it anyway, but now I`m in the squirrel cage of borrowing money to pay taxes.  So everyone is going to have to excuse me of being skeptical of getting out of paying taxes, they get you in the long run.

 

Okay if you`re a Bigshot, renting an extra 500 acres and growing every year, then yes you keep borrowing and spending and growing and it magically works out.  But, you better hope you don`t start losing 500 acres a year and you better hope that $5 corn and $11 beans are here to stay.  

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