Posted on 03/14/2018 7:29:12 AM PDT by tired&retired
When does life begin for farm animals- Conception or Birth?
Dairy cows and horses held more than 2 years qualify for special capital gains treatment when sold. While this might appear trivial, many dairy farmers are liquidating due to the low milk prices and selling off their entire herd resulting in hundreds of thousands of dollars in proceeds. Heifers less than two years old create a tax problem.
The question is: "What is the acquisition date of cattle or horses born on your farm/ranch from your animals?" Conception or Birth?
If it is conception you have an extra 9 months holding period on these animals. It makes a big difference between a maximum 15% capital gain or being taxed as ordinary income subject to income taxes at the marginal rate, self employment and earned income taxes.
The laws applying to humans and when life begins do not necessarily apply to farm animals. For example... eggs have value before hatched!!!
When you can put a tag on its ear.................
“When you can put a tag on its ear...” I can use that if I can support it in the law. The law is unclear.
Prenatal surgery....
I’m working on a situation where the amount in question is $96,000. I do have other ways of sheltering the ordinary income such as section 179 depreciation write off but would rather save that for the future.
https://www.irs.gov/pub/irs-pdf/p225.pdf
IRS Pub 225 page 37:
Immature livestock. Depreciation for livestock
begins when the livestock reaches the
age of maturity. If you bought immature livestock
for drafting purposes, depreciation begins
when they can be worked. If you bought immature
livestock for breeding or dairy purposes,
depreciation begins when they can be bred.
Your basis for depreciation is your initial cost for
the immature livestock.
This is what I thought concerning Billy Graham. His birthday was in November and he passed in February. It is 9 months from February to November. He may have died on the day of his 100th year from conception.
Then it’s ‘overhead’.....................B^)
When dad sold his small herd, it was birth.
And I’ll bet that how every IRS auditor sees it too.
I assume in the cases of paying for service by a breeding bull, or for artificial insemination services, the cost of those is included in the “cost of acquisition of immature livestock.” I assume it, but don’t know it. It is IRS, after all. :-)
If you hired your neighbor’s bull to breed it would start at inception. If it’s your bull then you’re an owner operator. That’s my opinion and I didn’t stay at a Holiday Inn either.
Yes, I agree. But that is for depreciation purposes which is based upon a “Put into Use” standard, not acquisition date.
I’m specifically looking at “Holding Period” based upon acquisition date.
He may have died on the day of his 100th year from conception.
Excellent observation... His soul arrived at conception, departed at death.
I agree with you.
“And I’ll bet that how every IRS auditor sees it too.”
I am also a CPA, have handled many farm IRS audits and quite a few Federal Tax Court cases over 40 years of tax work. This issue has never come up, nor could I find any court cases to question either position.
I posted it here on FR as it addresses the when does life begin question.
Keep in mind that “put into use” would begin at conception as that is what causes the mother cow to produce milk.
I see both sides of this issue and tend to always take the conservative approach when preparing the return. In actual IRS audits I throw every beneficial issue, even those not taken on the return, at the agent as I have nothing to lose and can only gain.
“artificial insemination services”
Not cheap either, especially if you use sex sorted semen to get all heifer calves and no bull calves.
Here is the exact wording on the 4797 instructions(cut & paste).
“To figure the holding period, begin counting on the day after you received the property and include the day you disposed of it.”
Then you know the burden of proof will be on you.
If disallowed, you’ll just pay more.
“Then you know the burden of proof will be on you.”
I will not take a tax position unless it is supported by the law or court cases. It must be reasonable.
The penalties are too high to risk taking an unreasonable position when the return is filed.
“If disallowed, you’ll just pay more.”
True. That’s why you take a risky position only in an audit as you have nothing to lose. I also don’t argue with IRS agents.. they are pretty good to work with and we just agree to disagree and send it up the chain of authority.
How is the Rule Against Perpetuities calculate?
The Rule Against Perpetuities does not apply as pregnancy is never forever!
If we extend this just a little bit, it could mean that if a man's neighbor impregnates that man's wife, life starts at conception, but if a man does it for himself, life doesn't start until birth.
The Child Tax Credit for my children didn’t begin in the year of conception. That should be a clue...
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