30—Lancaster Farmr Good farm management takes tax planning By JOANNE SPAHR QUARKYVILLE - Now is the time of year when the big question on the minds of fanners is “how should I invest my money to get the best tax break?” A complex question to answer, it poses several avenues to follow, each with a different set of ad vantages. “Good farm management takes a planned tax program,” states Gary Martin, Quarryville, an account supervisor for Farm Management and Business Analysis, a service organization of the Penn sylvania Farmers Association. “Depending on the various farmers’ needs, each will require a different type of tax set-up over a period of years,” states the expert. “And, while a good manager can do it on his own, close study and farm analysis can often offer the best results.” While there are several different types of organizations 'performing this service, Martin warns farmers about tax prac titioners with limited knowledge of agriculture. “There are nine basic areas that non-farm tax practitioners are known to miss,” relates Martin. “One of the most outstanding is capital gains treatment of raised dairy cow sales.” According to Martin, raised dairy cow sales are eligible for capital gains treatment and don’t have to be sold on schedule F. “In other words, the dairyman has to only pay tax on half of the sale, and there’s no social security,” explains Martin. THE ALASKA WOOD BURNIHO STOVE AND FIREPLACE (A Modern American Version of a Canadian Step Stove) Limited Dealerships Available Cost Less Built Better baffle Don't let anyone tell you a baffle system isn't important! TRUCKLOAD ARRIVING WEEKLY STORE HOURS: Closed Mon. and lues. Wei thro Fri. 10 to 8 Sat 10 to 4 Other ha:s by appointment December 17,1977 The second major area often overlooked is in vestment credit. “Most of the time it’s not taken-it’s missed com pletely,” says the account supervisor. “One particular item that is not considered is a silo. Some practitioners are just not aware that farmers are available for investment credit - with these.” A third problem area is depreciation. “there are many different methods of planning depreciation,” notes the PFA specialist. “And, the person figuring it must know what the farm is going to do. Also, you can’t just lode at the past year as a guide. Therefore, a service which has been watching a-farm’s progress all along is better equipped to determine the practical type of depreciation needed.” > There are several other areas such as federal gas tax credit and income averaging which 'are sometimes neglected, although they are not as outstanding as the above three. “I’m not saying that'all non-farm practiontioners will do this,” points out Martin. “But you do want to be careful when you’re just taking your taxes to the guy down the road.” And, for those farmers who are not even bothering to plan for the future, Martin clearly states that there are substantial savings in volved. For example, on a farming operation which takes in a gross income of $96,814; has an adjusted gross of $18,142 after cash expenses, depreciation, and the ad ★ Heating One Room Or Entire Home ' - ★ 5 Handsome Models Sand Blasted Finish ★ Construction— >/«” & 5/is" steel boilerplate, firebrick lined-extra brick, Airtight cast iron door-greater effi ciency, Baffle plate lower stack temper ature. ★ Lifetime Guarantee ★ Chrome Trimmed ★ Hot Air Unit Available .^57 CHESTER B. HOLT (Dist) 24 S. Hershey Ave. Bareville Leola, Pa. 17540 Phone (717) 656-6898 dition of capital gains on raised dairy cow sales; has four dependents; gas tax credit; and no investment credit, the total tax load is $3847. Acceding to Martin, if that operation spends $5OOO on cash expenses, it will save $1562 in taxes plus discounts on chemicals and fertilizer by buying ahead. In other words, that farm manager can save 31 per cent of the $5OOO he invests in cash expenses. If, on the other hand, that same manager spends $5OOO on equipment with seven years depreciation, he will save only $B7O in taxes, which is 17 per cent of his $5OOO investment “Normally,” says Martin, “you don’t get quite the benefit from equipment. But, it gets down to management. Looking strictly from the tax ad vantage, you’d go with the cash.” “This is what our service does,” explains the account supervisor. “We go over the taxes in detail and using a * practical program, we come up with the best plan for the future.” Farm Management and Business Analysis has 34 account supervisors in Pennsylvania serving 3,76fi PFA members, which comes to about 20 per cent of the regular membership. Only PFA members are eligible for the service, which is solely supported by those using it. Although it is based on gross farm income, the base amount is $2OO per year. While the most beneficial service the organization performs is probably the tax estimate, they do make three other visits to the farm each year to do taxes, business analysis, and gas tax refunds. They also get involved with partnerships, estate planning, and cash flow problems. For more information on " the service, contact the local county Farmers Association president or supervisor in the area. Gary Martin, Quarryville, account Business Analysis Service works on tax supervisor for Farm Management and forms in his home.
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