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12—Lancaster Farming, Saturday, November 10,1984
Brockett's Ag Advice
Ih By John E. Brocket!
IV Farm Management Agent
Lewistown Extension Office
TAX LAW CHANGES
It is getting to that time of year
when you should be preparing for
tax season. The tax reform act of
1984 did not receive a lot of
publicity, but is going to cause
some problems. Let’s take a look
at some of these changes.
Imputed Interest
Most of you don’t know what this
means. I didn’t either until I looked
it up. It means that if you don’t
charge enough interest when you
sell something on an installment
sale, the IRS can call part of your
principal income interest.
The 1984 act pegged this interest
on a multiple of the so called
federal rate (10 percent this year).
This meant the imputed rate would
be 12 percent. Recently I received
a report that this action has now
been postponed until July 1985.
Hopefully your Congressmen will
get enough mail on the subject to
retract on that law.
Interest Free Loans
IRS has been fighting this for
years. They are now getting their
way by convincing Congress to
pass a bill not allowing below
market rate loans. Thus the money
you lend a child or any one else will
have to carry a certain interest
rate. It will be interesting to see
what the IRS regulations will call
“market rate.”
As is often the case with new tax
laws, the wording of this law will
result in a lot of court cases as well
as upset and frustrated people.
Over the next 3 or 4 years, the IRS
and Tax Courts will develop a set
of rules to govern the issue. At any
rate, it will more than likely cause
a harship on families who are
trying to help a child get started in
farming.
Depreciation Recapture
From now on anyone who sells
depreciable property on an in
stallment sale will have a larger
tax to pay in the year of sale.
Previously you could pay tax on
the gain as you received it. Now
you will pay tax on the entire
amount of gain the year you sell
the item.
It hardly seems fair to do this
since you are not allowed to
depreciate the item off in the year
you purchase it.
Investment Credit Change
You will have to be more careful
NEED
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with items you purchase that are
for both the business and personal
use. If business use is less than 50
percent you will not be allowed to
take investment credit on it. Some
examples would be cars, com
puters and water wells. I don’t
know how anyone is going to prove
percentage use of any item. You
may be forced to keep a daily log of
use. Example; On October 28,1984
- used the car to go to church (10
miles) On October 29, 1984 - used
the car to pick up parts at the
dealers (10 miles), etc. That’s 50
percent business use so far.
Mortgage Interest Reporting
by Payee
(starts in 1985)
For several years the person
who pays interest to anyone other
than a corporate being, was
supposed to file a 1099 reporting it.
Now in some cases the person who
receives the money will also have
to report it.
Do not treat this item lightly. At
present, anyone who fails to file a
1099 reporting interest payments
(as well as rent, contract work,
etc) is subject to a fine of $5O for
each missed report. Once the new
law takes effect, there will be the
same penalty.
Estimated Tax Payments
The IRS is clamping down on
estimated tax payments. For those
who are supposed to pay quarterly
estimates, the safest way to do it is
to pay 25 percent of the previous
years tax for each quarter. Full
time farmers are not affected by
this. They are under the same
rules as before. One estimated
payment by Jan. 15 then file final
return by April 15 or pay total
amount due by March 1.
STORAGE BARNS
46 Queen Road
Intercourse, PA 17534
(717) 768-8673
Located V* Mi. South of Intercourse on Queen Rd.,
Off Rt. 772
DO YOU NEED HOUSING FOR
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• 10’x20’
• 12’xl6’
• 12’x20’
fall For Prices On Other Sizes
i
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A SUBSCRIPTION TO
forming
ONLY *7.50 PER YEAR
or
*13.00 FOR TWO YEARS
In PA. NJ. MD. DE, NY. VA & WV
(Other Areas $14.00 Per Year or
$24.00 For Two Years)
LANCASTER FARMING WILL SEND A GIFT CARP
Announcing The Start Of The Gift Subscription
PLEASE SEND LANCASTER FARMING TO
(Please complete all blanks m full)
NAME
ADDRESS
CITY
GIFT CARO TO READ FROM
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COUNTY
We begin our construction with pressure
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Larger sizes for on-site building are
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OUR BARNS PROVIDE WINTER
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TOOLS, LAWN MOWERS, BIKES,
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Clip And Mail This Coupon To:
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P.O. BOX 366
LITITZ, PA 17543
Subscriptions Will Begin
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.STATE
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