How Administration Tax Package Affects “Tax Loss Farming” The Nixon Administration tax reform package indirectly limits some ‘tax loss farming” abuses. Tnere are important differences in objectives and lines of attack between the Administration pro posal and the Metcalf-Culvcr tax Need . . . HAY ■ STRAW - EAR CORN Buy Now and Save! More and more farmers are buying from us for better value and all around satisfaction. Delivered any quantity Phone Area Code 717 687-7631 . Esbenshade Turkey Farm “America’s Oldest” PARADISE, PA. HAND i oB*. / ktj Sam i f* - vfv'"' I It loss farming bill. The Metcalf- Culver bill attacks the pioblcms of non-farm interests in agricul ture head-on It limits or elimin ates writing off farm losses over $15,000 against non-farm income (if non-farm income Is $30,000 ANNIVERSARY SALE • STARTS FRIDAY, MAY 2 DOORS OPEN AT 8:30 A.M. • EIGHT BIG DAYS OF SAVINGS IN THE GREATEST SALE OF THE YEAR! • VALUES GALORE FOR YOUR FAMILY, FOR YOUR HOME, FOR YOURSELF! OUR GRAND PRIZE! No pmchase necessary. Winner’s name will be drawn Saturday, May 10, at 4:50 P.M. Alternate prize: a $l2OO shopping spree. Be sure to register on our second floor for this thrilling vacation ... a 14-day trip to London via Pan American Airways, arranged by Ridgeway Tours. SHOP FRIDAY AND TUESDAY 9:30 TO 9 or over, no farm losses would be deductible). Eliminating the tax incentive is merely the device for accomplishing the objective. The Administration proposal comes at the problem from the other end—seeking to limit var ious ways people evade or un fairly reduce their taxes Tax loss farming happens to be one abuse. The Metcalf-Culver bill deals quite effectively with the en croachment of non-farm interests into agriculture. In the process, it closes an important tax loop hole and brings a good deal of money into the Treasury (an es timated $145 million a year). The Administration proposal deals less effectively with the entry of non farmers into agriculture. Neither does it close the tax loss farming loophole quite as firmly, nor does it promise to bring as much money into the Treasury (an estimated $lO million the fiist year and $5O million a year by 1975). The major Administration de- 91- WIN A TRIP FOR TWO TO LONDON OTHER DAYS 9:30 TO 5 Lancaster Farming. Saturday. May 3.1969 vice for closing the tax loss farm ing loophole is to limit capital gains after faim losses have been excessive (above $5,000 a year). Thus, the conversion of ordinary income into capital gains by sus taining heavy losses year after year which arc written off against ci dinary income, would be sharp ly limited It gets at the pioblem in an indirect and complicated way. Here’s how it would work When farm losses are ovei $5,000, a figure representing the excess would go into what is called an Excess Deductions Ac count (EDA). Fuluie farm in come would reduce the EDA and would be taxed as oidmaiy m come as long as anything is left in the EDA No capital gains would be allowed until the EDA is wiped out. For example, a corporate ex ecutive owns a faim and in 1969 ordinary deductions exceed or dinary income by $20,000 He can write off this loss against his other income, however, $15,000 goes into his EDA. In 1970, his ordinary farm income equals farm expenses, but he sells breeding stock for $20,000 Pre sently, if he had held this stock for more than a year, the $20,- 000 would be taxable as capital gains. But under the new pro posal, he would be requited to pay ordinary income tax on $15.- 000 (the amount in the KDA), and would be eligible for the capital gains i ate only on $5,000. This same rule would apph to land, but only up to the actual amount spent on such impi ove rrent on soil and water conserva tion, or the amount in his EDA. v hichcver is lessci Another pait of the Admimstialion pioposal pi ov ides for lecapluie of exces sive depieciation on livestock, the same as now applies to faim machinery The period livestock must be held for capital gains would be extended to two yeais (fiom the present one year). This would cut down some of the “play” by Wall Stieet faimeis b> making it less attiactive for them to get in and get out so quickly In addition, the Admin istration pioposal would allow losses of $50,000 moie than gross income for only three out of five years, instead of the present five consecutive years Another pait of the Adminis tration reform package would cut down some of the gioss abuses by a Limit on Tax Pref erences (LTP). One such “tax preference” is capital expendi tures on farms such as soil con servation, terracing, drainage, etc But this limit would only apply when the total of such preferences, such as oil deple tion, depreciation of property gnen to charity, and farm pref erences total more than the indi vidual’s ordinary income It would probably take a combina tion of such preferences to be affected. If agricultural chemicals were not used for insect control, crop and livestock production would decrease by 25 to 30 per cent m a few years. With such losses, most food items would be in short supply and prices of food would rise greatly. This SIMPLICITY tractor with Hydrostatic Drive wants to be compared. Test us against any other hydro static diive tractor The Sim plicity will opeiate continuous ly at full tractive effoit (tilling, cultivating, etc ) without over heating The Simplicity starts smoothly and mns quietly m any weather and with any at tachment Gone foievei are the jerky staits and whining geais that plague some other units As a mattei of fact, if you don’t tiy some other hydrostatic tractor, you’ll never know how good you’ve got it with Simplicity. • Rugged 12-hp Synchro-balance engine • Change speed and diiection with one lever • Optional 48-inch No-Scalp mower • Change attachments in minutes without tools • 4 Horse Powers To Pick From 6 - 7 - 10 -12 Allen G. Musser Bowmansville, Pa. Phone: 445-4161 or 445-6721 25
Significant historical Pennsylvania newspapers