A3B—Lancaster Fanning, Saturday, March 29,1980
Why Jessie-type partnerships
make a lot of ‘cents’
BY PAT KAUFFMAN
LANCASTER Money,
the making and keeping of it,
was the reason behind the
recent spectacular price of
Lime-Hollow Elevation
Jessie.
While Jessie’s genetics
and records were the
reasons for her selection as
the cow to purchase, in
vestment tax credits, tax
shelters, and long-range
capital gains were the
reasons behind Jessie
Partners’ search for a cow.
M. Robert Young, one of
two general partners in
Jessie Partners, has been
involved in other part
nerships. In particular, he
and Martin Y. Sponaugle,
the group’s attorney, are
also currently involved in a
partnership comprised of
three general partners and
nineteen limited partners
and the purchase of a cow
nicknamed Tilly.
In both the Jessie and the
Tilly partnerships, the
structure is generally the
same. Two or three in
dividuals serve as general
partners in the group taking
care of the purchase,
maintenance and sale of the
animals. In addition, there
are varying numbers of
limited partners. These
limited partners are limited
both to their participation in
the group and to their
liability. In other words, the
limited partners are strictly
investors.
Sponaugle explained the
interest in purebred cattle.
“Suppose a person were to
buy a $50,000 cow. And also
suppose that the person is
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HotlUUf&l'b FARM MARKET
1755 WEST MAIN ST.
V* mi west of Ephrata on Rt 322
currently m the 50 percent
tax bracket. By his purchase
of the animal, he comes
under the heading of farmer
and can make use of credits
and accelerated
depreciation normally
available to fanners.”
“Now let’s say that on this
$50,000 cow, the purchaser
takes the first year in
vestment credit of 10 percent
or $5OOO. In the 50 percent tax
bracket, this is equivalent to
a $lO,OOO deduction. If the
person then assigns a life to
the cow of 7 years, he can
depreciate her at what would
amount to a $10,700
deduction. And if he holds
the cow as breeding stock for
at least two years, he can
claim an additional $2OOO. In
total then,” claimed
Sponaugle, “the buyer can
claim a first year deduction
of $22,700. And if he pur
chased the animal with a 30
percent down payment or
$15,000, he has recovered his
investment the first year.”
Sponaugle added,“What
you have to remember is
that the tax advantages are
all in the front end here. The
investors are looking for a
gain-over the long term. And
that gam will eventually be
taxable.”
Sponaugle was quick to
point out that these part
nerships come under the
Securities and Exchange
Commission’s regulations
and are fraught with pitfalls.
“Many attorneys are not
really familiar with all the
regulations governing these
partnerships.” Caution, he
emphasized, must be
exercised even by those who
have a working relationship
with the myriad of laws to
assure compliance with all
the regulations.
The internal workings of a
partnership are' set up dif
ferently for each one. But in
the partnerships recently set
up by Sponaugle, a main
tenance contract is issued
for the care of the cow and
her off-spring which, if the
buyer hopes to take ad
vantage of capital gains tax
breaks, must be held until
the age of two. “You’re
entrusting the farmer with a
sizeable investment, and
much of the success of the
investment depends on the
care the animal receives.”
The biggest hazard m the
investment in purebred
cattle, is the possibility of
sterility, Sponaugle noted.
The second as he sees it is
the production of an excess
number of bull calves, and
the third is the uncertainty of
economic conditions that
could make the availability
of purchasers for high priced
off-spnng a problem.
Sponaugle noted that while
each partnership is dif
ferent, shares are generally
sold to less than 25 partners
to ease the restrictions on
the group.
While Sponaugle declined
to indicate the size of the
individual investments
needed and the projected
profits, he noted that the size
would be relative to the
purchase pnce and the
number of investors in the
group, and the profits would
have to keep pace with
existing returns on govern-
717-738-1131
$116,000 cow
Young explained he is in
charge of purchasing and
selling and Crouse is m
charge of Jessie’s care. The
other partners are simply
investors. The limited
partnership arrangement is
used as a tax shelter and is
regulated by the Securities
and Exchange Commission.
Jessie was bred by Benny
Gunzenhauser, New York
and was co-owned by Ron
Mueller, Illinois. What
prompted the owners to sell
such a landmark cow?
Young theorized that the
geographic distance bet
ween the owners and the fact
that Jessie as a six year old
is now in her pnme were the
two determining factors.
Contending bidder at the
auction was Larry Kibler
and Associates, Stanley,
Virginia.
ment bonds, currently The Great Expectations
around 15 percent. Chapter Three auction was
In addition, to attract the third annual auction held
investors, it would be m Lancaster County and co
necessary to project a return managed by Young. He
of closer to 20 percent per explained he tries to get
year on the partners! Junds. cows with both outstanding
While he expressed great pedigrees and outstanding
hopes for Tessie and looks for the prestigious
satisfaction with the
previous partnership in- The purchasers’ part- to Poverty Hollow Milestone
volvmg Tilly, he noted that nershin was formed when 10 j
the structure of the part- S leLSesTwas to be ** , b f- mtr( ? uce J to
nenfc.p. was stad.eC dU SS* emb^o
and took a sizeable chunk of Average nrice for all i 8116 *
time and study to institute, animals auctioned including ved. Recently one of
This area he cautioned is for animals aucQonea, including j essie ’ s daughters brought
eSonlv Jesse, was $9150. $3!,000 in Reno, Nevada,
y- Jessie is currently in calf according to Young.
[liliSoW’S! mMmtL 1
I MACHINERY—TRACTOR
CONSIGNMENT SALE
SATURDAY, APRIL 5,1980
(Continued from Page Al)
eighth generation to have
completed a 20,000 pound'
lactation. To my knowledge
there are no other cows in
the U.S. with both these
distinctions.”
The purchasers, Jessie
Partners, have entered into
a limited partnership. The
twa leading or general
partners in the group are
Young from Lancaster and
Galen Crouse on whose farm
Jessie is stabled.
In addition to the general
partners, there are five
limited partnerships
belonging to Robert and
James Humphreville,
Lancaster; Stanley Brunn,
New York; Elden Bjurlmg,
Massachusetts; Ty Myers
and Larry Wyles.
! 10:30 A.M.
I Located 1 mile South of Sheds, N.Y. on Route 13.
| TRACTORS & INDUSTRIAL EQUIPMENT
IFord 4600 Diesel 1010 hrs.; JD 50 wide 3 pt; IH 706 D; ffl 560 D; Oliver 1955 - New
Motor; IH 450 D; Oliver 77 gas; JD 620 - Hi clearance; Belarus 250; Ford 800; AC WD
w/half tracks; Ford 3000 w/loader; Oliver 1950 T; IH 450 Gas; JD A: Oliver 800; Case
X 400 Diesel w/3 pt.; AC Dl7; JD A w/3 pt.; IH 656 Utility w/loader; MF 85 gas; Ford
I 5000 w/IH 2000 loader; JD 4230 w/4 post rollguard; JD A electric-start-new paint;
I Case 800 log skidder w/new motor, winch & chains; Army 6x6 w/Crane loader-log
i clam; Ford 4500 Backhoe & loader; IH T 6 Crawler; IH TD24 Crawler; Case 450
I Crawler loader; 8 ton 2 axle pentle hook trailer; General 9 ton 3 axle skid steer loader;
5 75’ Owatonna 1700 - water cooled hydro; NH 2500 2 yr. old; 72’ Case 1530; 70’ Melroe M
I 500; 71’ Melroe M 700; Lorraine 4x4 loader, 1 yard bucket.
| HAY EQUIPMENT
2 JD 224 baler w/#3O ejector; 9x16 Kicker rack w/heavy gear; 9x16 Kicker rack new
I last summer; 3- NH 469 haybine; Kuhn hay tedder; 30’ hay elevator; Gehl 72 A flail
£ chopper; NH 56 rake; 26’ smoke elevator; Nicholson hay tedder; Ford 3 pt. mower;
■ Ferg. 3 pt. PTO rake; NH 66 baler w/motor; New 9x 16 hay rack w/gear; Fahr hay
£ tedder (like new); NH 479 haybine; AC 3 pt. mower; JD 1209 mower conditoner; MF 3
r pt. mower (Nice) JD flail chopper; hay head for 770 chopper; Kicker rack & gear; JD
I mower conditioner.
I PLANTING & TILLAGE EQUIPMENT
i IH Transport drag; JD 3 bottom trailer plow; IH 470 disk 13’; Bnllion 10’
£ Cultipacker; IH 4 row 2 pt. Cultivator; JD 4 bottom, trailer plow; 12’ Transport disk;
* Brillion 14’ transport Harrow; MF 4 bottom semi-plow; JD #630 14’ plowing disk;
I Bnllion 16’ trans. harrow; IH power set harrow; JD 5 bottom semi-plow; IH 540 4
f bottom semi-plow; JD 2 row com planter; NI3 pt. fert. spreader; IH 56 4 row com
Z planter; JD 494 A 4 row planter w/Insecticide Attachment; United Farm Tool fert.
I spreader; 4 ton hyd. fert. auger wagon.
I HARVESTING EQUIPMENT
I IH 1 row com picker; JD table blower w/pipe; Lamco self-unloading wagon; New
f Idea blower - used 1 season; Gehl chopper w/2 heads; JD 60 L blower; Gehl 600
r chopper w/2 heads; NH 2 row com head for 880,890; JD 112 self-unloading wagon; NH
I 770 2 row narrow chopper w/pickup head (sold separate); AC hopper blower; Gehl
* hopper blower; IH 56 blower; Gehl chopper; AC Table blower.
j MISCELLANEOUS
f IH 540 spreader w/hyd. end gate/ Bamomatic can; 2 - yellow devil sprayers; 2-
Z gravity boxes; Surge milker pump w/6 electnc pulsation units; 2-5 ton running gears;
I Hawk Barrel spreader; 1970 Ford 3/4 ton pickup w/cattle rack; AC PTO Spreader;
Chevy Truck w/cattle rack; 18.4x34 snap on duals; Windbreaker for 706; Wind
breaker for 656; Water fowls; 66 Dodge 1% ton track.
Consignments received up to April 4th, 5:00 P.M.
Auctioneer;
Ted Steth Auction Service
Cincinnatus, N.Y.
607-863-3875
or Carl Darrow
Sheds, N.Y.
315-662-3826
i Terms: Cash or good checks approved by auctioneer. »
Eats available. I
Farm Calendar
(Continued from Page Alo,'
tnomreV; hguorht
yadsertdeW.
draykcaß tiurf gmworg;
03:9-03:11 m.a.; dna 03:7-
03:9 m.p.; mraF dna
emoH retneC, retsacnaL.
S’LIRPA SLOOF; 11a yad.
Wednesday, April 2
Hunterdon, N.J.; County
Board" of Agriculture
monthly meeting; 8:00
p.m.; Extension Center.
Red Lion FFA banquet; 6:30
p.m.; Red Lion Senior
High School.
Lancaster County Con
servation District’s
monthly board meeting;
7:30 p.m.; Farm and
Home Center, Lancaster.
Thursday, April 3
Adams County stone fruit
pruning; 9:00a.m.
Friday, April!
Pennsylvania Relief Sale,
Mennonite Central
Committee; Farm Show
Building; through
Saturday.
Saturday, April 5
Maryland Polled Hereford
Sale; Frederick
Fairgrounds, MD.
4P
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