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SAVE TAXES WHEN SELLING BREEDING LIVESTOCK

James Casey

Summary

As you begin to organize your farm and ranch tax records for filing your 2010 income tax return, you should separate the sale of breeding stock from your normal calf sales. Report your normal calf sales on schedule F, along with your operating expenses for the farm business. However, the sale of breeding stock actually receives a different tax treatment and will not be recorded on schedule F. Under current tax law, the sale of purchased breeding livestock will result in a tax liability on depreciation recapture and possibility a capital gain. However, the sale of raised breeding livestock will result generally in a capital gain. In either case, the sale is not reported on schedule F and thus is not subject to self-employment tax. In addition, the capital gains rate for tax brackets one and two is zero from 2008-2010. The sale of raised breeding livestock could result in no tax liability. It is important to keep a good set of records on you herd and alert your tax preparer regarding the sale of breeding livestock. It is very important to emphasize that this discussion is very general and, in no way, should be a substitute for the advice of a good tax professional. There are many variations and circumstances that may alter the results in the above discussion. To take advantage of the zero percent tax rate for 2008-2010, farmers and ranchers can utilize a variety of strategies to manage or minimize their taxable income. The bottom line is that the taxpayer needs to consult with a tax professional to develop and implement a sound strategy.

Details

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