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Advisor

Re: Pole barn and taxes

That's what we came up with today Kay.

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Senior Contributor

Re: Pole barn and taxes

One reason I built my machine shed when I did was my CPA told me the building depreciation schedule would alter significantly the next year.

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Advisor

Re: Pole barn and taxes

I've been mulling over the idea of a new pole barn for a good 6-8 years.  I need more storage space and the present 1 is in bad shape and makes my whole place look crappy.  But on the financial side of it it just doesn't pencil out.  As far  back as I remember the depreciation for machinery storage has remained the same, 20 years.  Every year when I get the taxes done my CPA and me talk it over.  I talked to a tiler this week about tiling a farm I bought this year.  It needs a new main run thru a 40 belonging to a friend and he wants to tile it.  So we're going to get together and probably tile both.  Something like this always pops up when i"m ready to go with a pole barn.  Also eyeing up another farm for next year.

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Advisor

Re: Pole barn and taxes

Sounds familiar...whenever I want to do something that just makes things look better, something else comes up that is actually more of a functional issue.  It boils down to choices like "drains well" v "looks crappy."  It's sort of like deciding between cosmetic surgery and a kidney transplant, isn't it? 

Is the present machinery shed big enough?  If so, is there a middle ground on it such as a facelift, spraying it with a fresh coat of paint if the sheet metal is sound, or new sheet metal on the old framing if it's got holes?  Repairs should write straight off in any tax year, regardless of what Congress does or does not do in the next couple of weeks.  If the framing is sound and straight, that is a no-brainer to me...lots of enbedded energy and money in already-standing building framing. 

If it's not big enough, could you extend and repair it and still accomplish the tiling in your budget?  One more row of posts and a few sheets of tin can cover a whole lot of expensive equipment against the ravages of weather.  We added side sheds to one hog house on each of two of our three production sites a few years ago, for roughly $1 a square foot for materials, plus our own labor. 

It took one day to lay off, drill postholes and set posts in concrete, one to frame the rafters from a ledger on the eaves of the hog building, and one to sheath and square and screw on metal.   That was two people making 1600 square feet in three days.  Not bad, given that the days also included all regular farm work.  If we'd had to pay skilled labor at $250 a man per day, then the cost of the sheds rises to $2 per square foot.  Still not bad. 

This gave us nice, south-facing sheep sheds on the raised building pads, on both sides of the hog farm path, inside different fencing loops.  I will not have animals unless they have shelter. 

Back home on Mike's place, we did something similar off of the side of the farm shop, basically built lean-tos.  Here, we gradually added side sheds to three sides of Mike's little farm shop, and full-length sheds to the barns up at daughter's end of the farm, which have become very useful for adding stables underneath, or for run-in sheds for the grazing horses.  Very quick cover and very cost-effective. 

If you do not want to invest more in that crappy shed, you may be easily able to replace the storage off the sides and ends of other buildings, with a ledger board, some rafters,  and one row of posts, or one with a second, interior one and some extra framing and bracing to get better open spans.  Basically, if you can get by with rafters and not need trusses, you can save considerably. 

I am waiting now for my son to have an opening in his construction schedule, to frame a center rafter section between some side sheds we built for a kennel and small lawn equipment and truck parking here near the house.  That one 26x40 will cost me more than the rest of the much more  extensive sheds and the improvements in them all together.  I will avoid buying a truss whenever I can now! 

Look at the farmstead, and see if you've got a more cost-effective solution to machine storage. 

Senior Contributor

Re: Pole barn and taxes

I don't claim to know anything about building depreciation.  I do think that leases are acceptable in virtually every situation if they are a true tax lease.   Just like you said dotting all the i's and crossing all the t's according to the tax code.  The big one that most fail on is a true value at buyout and not the one dollar buyout option.   Most leases are glorified loans so the leasing company can have easier access to repo the equipment. 

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Advisor

Re: Pole barn and taxes

The shed was built in 1973.  One of the 1st of the "modern" storage sheds in my area.  I was just out of the service and I remember many farmers stopping to look at it.  Alas, it was built with no ventilation. None.  So, it being an all steel structure it started rusting, bad.  The support beams are in awful shape.  You can see thru some of the purlings.  I had the roof repainted in the early 90s.  Most of the paint is washed off the siding.  It literally isn't worth saving.  When dad built it he thought it would be big enough forever.  Now my combine and 4wd tractor take up 1/3 of it.  I get all the good stuff in for the winter but all the tillage equipment sits out.  As long as I have a place for the planter and combine I can muddle thru for now.  TY for your response.

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Advisor

Re: Pole barn and taxes

Excuse me if I am missing something here but why would the leasing company repo equipment that's paid for.  Do you mean they would put a lien on the equipment for collateral?

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Advisor

Re: Pole barn and taxes

I just read the article by Jeff Caldwell  12-23 10 on this subject.  Supposedly multi-purpose buildings are now eligible under the new tax law as of 12-17-10.  Looks like some phone calls are in order this morning.  My tax man evidently wasn't aware of the 50% depreciation before.

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Contributor

Re: Pole barn and taxes

Machine sheds qualifying for bonus depreciation is not a new thing.

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Advisor

Re: Pole barn and taxes

When did it go into effect?  When I talked to my CPA 2 weeks ago he said machinery buildings were 20 year depreciable items.

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