Dl6-Lancaster Farming, Saturday November 24,1984
Brockett’s Ag Advice
« By John E. Brockett
jl Farm Management Agent
Lewistown Extension Office
MORE ON TAX STRATEGIES
A good set of financial records
could help you decide (a) what
strategies to take to manage the
tax load, (b) is it necessary to do
anything, and (c) the possible
consequences of anything you do or
don’t do. Last week 1 briefly
summarized a few scenarios on
your tax situation. Let’s expand on
a few of them.
Let’s Reduce Them
Those of you who made a profit
this year may find that you have
more taxes than you had last year
on the same profit. Social Security
taxes for self employed people took
a whopping 2.35 percent increase
from 9.35 to 11.7. So you may
■decide to reduce taxes even if your
taxable income is about the same!
as last year. Here are some ideas.
First be sure that your extra in
, come is from earned income
(Scheduel F, Schedule C, Schedule
K-l - income from a partnership or
wages). That is the only income
that affects social security.
Reducing method number 1: Buy
supplies such as fertilizer, seeds
and spray. Reason: $lOOO purchase
of it will result in $lOOO of deduc
tible expense.
Reducing method number 2: Buy
machinery or capital livestock.
Result: $lOOO purchase here will
result in $l5O of deductible expense
plus $BO of tax credits.
Reducing method number 3; Buy
a building. Result: $lOOO purchase
of a building will result in $5O to $6O
of deductible expense.
What about holding off income?
Items such as com and steers
could be held back until January if
the storage or holding cost is not
too great. Result: $lOOO reduction
in sale would reduce taxable in
come by $lOOO. Cows, timber, and
land sales could also be held off in
part or whole. However a reduc
tion of $lOOO in such sales would
only reduce taxable income by
$4OO.
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Leave Alone
Sometimes good tax
management means leave well
enough alone. In other words
proceed as if taxes were no
problem. Why? It may be that you
already have excess investment
credit. It may be that you have no
tax consequences anyway. Or it
may be that you see 1985 as being
an even bigger year so there is no
incentive to reduce taxes for 1984.
Increae Taxable Income
Every family has a $lOOO per
dependent and a $3400 standard
deduction to subtract from taxable
income before taxes are
calculated. Thus a family of 4 can
make $7400 before any taxes are
due. In addition this is in a good
area for earned income credits. If
this family had a taxable income of
$3OOO, it might be sensible to‘hold
off on expenses or advance some
sales to boost it to $7400. This could
reduce taxes for 1985 at little or no
extra taxes for 1984.
Splitting Income
If you are considering a large
capital sale in December, do some
calculating first. If it is over
$40,000, you might save as much as
$BOOO by splitting the sale with part
of it in December and part of it in
January. Why? The alternative
minimum tax requires anyone who
has a total income over $40,000 to
pay at least 20 percent of the ex
cess in taxes. By splitting the
above sale you get to deduct $40,000
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Milk call provision to be considered
NEW YORK-Market Ad
ministrator Thomas A. Wilson on
Nov. 14 gave the three days notice
required to hold a meeting on what
is commonly referred to as the call
provision under the New York-New
Jersey Milk Marketing Orders.
This provision, Section 1002.27 (g),
becomes necessary if handlers
regulated under the Orders are
unwilling to supply sufficient
quantities of bulk farm milk for the
Class I fluid market. That is the
situation at present.
Mr. Wilson stated that the
purpose of the meeting is to
receive dairy industry testimony
from the sale twice before you are
liable for alternative minumum
tax treatment. Example; Take a
sale where the profit is $lOO,OOO.
Take the whole amount in 1984 and
your minimum tax will be $12,000.
Take half in 1984 and half in 1985
and your minimum tax will be
$2OOO in 1984 and $2OOO in 1985.
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pertaining to the information he
should use in determining the
required percentage of Class I
utilization which must be met by
all Order No. 2 pool plants and
units for the months of November
and December 1984 and January
1985. The meeting will be at the
Hotel Syracuse in Syracuse, N.Y.,
on Nov. 20, at 10 a.m.
For activating the call provision,
EQUIPMENT,Inc.
the order requires that the Market
Administrator issue a schedule
setting forth, by months, the
minimum percentage of Class I
required for plants and units. Mr.
Wilson further stated that any
handler’s designated pool plant or
unit that did not meet this per
centage would have its designation
or pool status cancelled or
suspended.
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667 Hartman Station Rd.
Lancaster, PA
393-6530