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Senior Contributor

Re: $500 repair/capitalization rule

So what happens at retirement?  Will the depreciation off set some of machinery sales price, can we use depreciation with out operating a farm, or do we just lose it? 

Advisor

Re: $500 repair/capitalization rule

As long as you have qualifying revenue in a calendar year, there is the allowance to offset revenue.
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Honored Advisor

Re: $500 repair/capitalization rule

Crop share rent ok ? Cash rent maybe not ?
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Highlighted
Senior Contributor

Re: $500 repair/capitalization rule

My Question too. What counts as " qualifying revenue" in a retirement situation?

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Advisor

Re: $500 repair/capitalization rule

Come again?  Crop share or cash rent?  Treatement of repairs is the same.

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Honored Advisor

Re: $500 repair/capitalization rule

ya smokey,  You were refering to the depreciation of capitol improvements when you said their deductability after retirement would still be there if there were still qualifying revenues to expense them against.  Anything over $500 isn't going to be a repair, is it?

Anyway something like that ----------

 

We were wondering what was going to be considered qualifying revenue at retirement to be able to finish depreciating the capital improvement?

Is the retiree forced to liquidate his depreciable assets in order to "retire"?  

 

It sure looks like something that will change the way we prepare for retirement and secession issues.

 

All refering to 

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Advisor

Re: $500 repair/capitalization rule

 Darn software gliches.  Have to re-edit this the second time.....

 

Anything over $500 isn't going to be a repair, is it?

 

Answer; no.

 

We were wondering what was going to be considered qualifying revenue at retirement to be able to finish depreciating the capital improvement?

Is the retiree forced to liquidate his depreciable assets in order to "retire"?  

 

 

Answer;  Any revenue stream coming from ordinary farm business is qualifying revenue.  You could also include revenue generated while renting machinery out to other farmers, I suppose.  There may be a question whether rental income from machinery, if that's the primary revenue stream, qualifying as Schedule F income.  Check with your local tax expert on that. 

 

A retiree does not have to liquidate anything to retire.  But it does not make sense to have depreciable assets with no revenue to offset.

 

 

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Honored Advisor

Re: $500 repair/capitalization rule

In other words farm revenue of a size to use the depreciation, may disqualify a person from SS benefit of retirement or the state of retirement.

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Advisor

Re: $500 repair/capitalization rule

 I don't know about that.  It takes proper timing to end a farm business.  Use installment contracts, deferred grain sales contracts, winding down on capital purchases to coincide with business termination, etc..  I've not done it before, so it is a new game for me.  I'm still trying to make my second million.....  :-)

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Honored Advisor

Re: $500 repair/capitalization rule

Thanks for your thoughts Smokey.

 

It looks to me like it has the potential to complicate the issue.  Which is ok for the guys with ten or more years left to adjust-----

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