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Veteran Advisor

The unintended consequences of regs

Every time the Gov. Tries to punish the big guys they seem to hurt the small guy worse. This is an interesting article on the financial overhaul bill.  WHile I keep trying to learn more about it there just isn't a lot of specifics yet. In fact this article seems to have more specifics than most. What do you think?

http://online.wsj.com/article/SB10001424052748704258604575361182317501188.html?mod=WSJ_hpp_LEFTTopSt...

One possible outcome could be a wider basis for those who use forward contracts. Basis contracts, or HTA's.  What say you? JR

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12 Replies
Veteran Advisor

Re: The unintended consequences of regs

Markets good-- no basis  ---Markets down---WIDE basis----to many experts with no SKIN in the game---

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Senior Contributor

Re: The unintended consequences of regs

My tax man advised me this week that the IRS expense provisions of the tax code allowing up to $250,000  worth of depreciation purchases to be expensed in the year they occur has expired this year. And, it will be rolled back to the $125,000 area. So, that could make a significant tax increase on some farm incomes. He said there is always a chance that Congress could pass legislation that would renew the expense ded. provision,. but with the mood of congress...doubtful. So, renting and leasing of machinery could come back into play here with all the lease/rental payments being totally expensed in the year they are made.

Of course you still can depreciate any purchases over the $125,000 limit over a 7 year life, but you no longer get that one year $250k  'expense bump' we used to have.

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Contributor

HIRE Act of 2010 extended the 250k thru 2010.

Have your tax man check that act........passed several weeks ago.

 

swkfarmer
Senior Reader

Re: The unintended consequences of regs

I'm so mad at the government I will not reply.

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Senior Advisor

Re: from this point of view

Businessmen should be able to deduct depreciation as a business expense but in reality they do not suffer 100% loss of value in the first year. Thus the depreciation loss should be deducted over the life of the item. It seems logical that the expense should only be charged off as it occurs.

 

I don't know that government can afford to give businessmen such a free ride.

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garvo2627292
Senior Reader

Re: from this point of view

And you kraft-t first to take it if you can!

 

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Senior Advisor

Re: Do You think i should balance the federal budget by myself?

Hunh?  Alas I don't buy much any more and I pay taxes on all my income. Perhaps I wouldn't have to pay as much if you didn't write off your $200K combine in one year. And you can do that whether you need it or not.

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Veteran Advisor

Re: Do You think i should balance the federal budget by myself?

I know of a few cases where business wrote of the depriciation before the payments were half made---talk about a real delema-  so what did they do--traded again and added to the note or were faced with paying huge income tax liability-not a good spot to be in--- 

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Contributor

That is a tax planning/structuring/control problem,.........

........... and has little to do with the use of the deductions, etc.

 

 

The allowability of Section 179 is no better/no worse than the earned income credit, granting favorable breaks to oil companies and airlines, etc etc.

 

It is not the govt's job---------at least it should not be, regardless of what the current Administration deems its role to be-----------to oversee whether or not someone uses depr to cut their taxes, as compared to good, solid, long term tax structuring, wherein depr merely becomes one tool.

 

So, if someone writes off a big amount this year, and is in tax problems the next years when they suddenly need to sell, etc the underlying equipment, so be it.  Lots of ways to have gotten around the sudden taxes related to that low basis equipment.

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