Discussion:08 Farm Building Depreciation
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Discussion Forum Index --> Advanced Tax Questions --> 08 Farm Building Depreciation
Discussion Forum Index --> Tax Questions --> 08 Farm Building Depreciation
| April 22, 2008 | |
| Haven't even had dust settle yet and have a farm client call about putting up a new machine shed. Someone (banker) told him that he would be able to 179 this expense for 2008 taxes. Has anyone heard anything about special allowances for this next year? The bankers other great plan was to lease to own. That way he would deduct the lease payments this year and after buyout depreciate the payout amount. Haven't been able to find anything about 08 farm rules. Any suggestions? | |
| 22 April 2008 | |
| Check out the 2008 economic stimulus package and the 50% bonus depreciation. Unless single purpose, farm buildings are generally depreciated over 20 years. For 2008 only, they would be eligible for the temporary 50% bonus but not section 179. | |
| April 23, 2008 | |
| So, now this banker says that a machine shed is a single purpose building because it holds equipment used to house, feed or raise the livestock. My interpretation of this is that it must be used to hold food and such equipment that would facilitate this not farming equipment. The other exception is that it hold fugiable commodities ie a grain bin or silo. This would qualify for the 50% but the farmer would like to expense it all. Anyone have any other intrepretations of this they could share that would help my client? This banker is driving me nuts. He wants the farmer to borrow money from him to do this so is pushing pretty hard. | |
| 26 April 2008 | |
| I love it when the local banker, feed store manager, or equipment dealer starts playing accountant. Of course, they're always right and I'm the one that has to pull out the code and regs to justify my position because their answer, although wrong, is the one the client wants to hear.
The banker is only using 1/2 of the definition of a single purpose agricultural structure. Read page 38 of Publication 225. The structure must be specifically designed, constructed, and used for BOTH the following reasons. 1) To house, raise and feed a particular type of livestock AND 2) To house the equipment needed to house, raise, or feed the livestock. In short, the livestock AND the equipment have to reside in the same structure. And this structure can't be used to house anything other than this livestock and related equipment without some significant modification to the structure. This definition will catch 99.9% of your single purpose agricultural structures. The explantion that in Pub 225 says that the facility must include, as an integral part of the structure, equipment necessary to raise, house, and feed the livestock. In short, the building must be built and equipped in a way that it can only be used for a single purpose. Your standard machine shed that houses everything from the planter, to the tractor, to the feed grinder, to the combine, can be used to produce feed for a variety of animals, not a particular type of animal. Also, this equipment is not an integral part of the machine shed, meaning it's not attached to the machine shed in a permanent, or semi-permanent manner. Parking the tractor and grinder in the shed is different from having farrowing crates, a feed system, and a flush system installed in a farrowing house which is built solely for the production of hogs and that's all it can be used for. Stick to your guns, the banker is wrong. If you want to now my ag credentials, check out my picture on my usepage. | |
| 1 December 2008 | |
| Any new developments since the tax legislation Heartland, Habitat, Harvest, and Horticulture Act of 2008? My client wants to lease a horticulture structure to house equipment only and he has been told that he qualifies for the new depreciation. He does not know what kind of depreciation, but I am assuming the lease company is talking about the 50% bonus depreciation. My understanding is this that he does not qualify for 50% bonus depreciation. | |
| 3 December 2008 | |
| What kind of "horticulture structure" and what type of equipment is he housing?
General purpose agricultural and horticultural structures are 20 year property and would qualify for the 50% bonus depreciation. Single purpose agricultural and horticultural structures are 10 year property and qualify for the 50% bonus depreciation as well as the Section 179 expensing election. | |
| 3 December 2008 | |
| Glad to here from you Luke. This is a Steel Pole Barn 28' x 40'. It will store tractors, wagons, plows, disk and culamuncher, etc. This farmer is a cash crop farmer and does not have animals. You mention two ways to depreciate. Which one would apply to this situation? ty | |
| 3 December 2008 | |
| The pole barn is a general purpose agricultural structure. It is 20 year property. If it was new property constructed/placed in use in 2008, it would qualify for the 50% bonus depreciation, and the remainder would be depreciated over 20 years. | |
| 3 December 2008 | |
| Yes it is new and constructed/placed in use in 2008. Thank You for your help. Have a good tax season everyone. | |
| 6 April 2009 | |
| Can anyone confirm the depreciable life on a farm house (manufactured home or stick built home)? I've got a client farm with a farm house and a manufactured home both used to house farm managers.
Here is the information I have found... Residential rental = 27.5 years, no rent is being paid, this is part of the farm manager's compensation package Farm buildings = 20 years, but the examples includes barns and tool sheds, does a farm house fit in with those? House trailer (that is mobile) used for farm labor = 7 years Single purpose ag building... this doesn't fit that definition but just for sake of comparison that life is 10 years Non-residential real estate = 39 years Thanks!! | |
| 6 April 2009 | |
| Residential -- sorry dude the farm managers do not fit the definition of live stock...gotta go with 27.5 years. The "rent" that the farm manager would be paying to live there is reducing his salary. | |
| 6 April 2009 | |
| Laticiaw, are you saying that in order for a building on a farm to count as a "farm building" depreciated over 20 years it must hold livestock? One of the examples listed for 20-year farm buildings is machine sheds - no livestock in machine sheds.
Is there anywhere to defines what the IRS means by "farm building"? In this instance the farm building is occupied by the manager. What if it had an office in it instead of being used as housing? Would it then be 20 year or 39 year? I'm probing because I seem to be immersed in farms these days. Thanks! | |
| 7 April 2009 | |
| The residential real estate depreciation rules apply. The farm manager's house does not qualify as either a "general use" or "single use" agricultural structure. | |
| 26 June 2009 | |
| If the house was provided to the manager rent-free, could the value be excluded from his wages based on the convenience of the employer standard?
If so, would the house still be written off over 27.5 years? Thanks, | |
RoyDaleOne (talk|edits) said: | 27 June 2009 |
| Generally see Pub 225.
Mobile homes capable of being moved on their own wheels are nonpermanent structures and therefore are not real property J. H. Moore CA-5, 74-1 USTC. The 27.5 asset recovery period is for residential "rental" property, the property is not rented and therefore is the use of 27.5 asset recovery period correct? Code Section 168(e)(2)(A) See Johnson v. Commissioner, T.C. Memo 1985-175 for a discussion of employer provided housing on a farm. | |
