FINALLY GOT OUR BONUS MONEY KIND OF SAD THOUGH ON HOW MUCH TAXES YOU HAVE TO PAY THE GOVERMENT WHEN ITS OUR LAND. WE PAY THE PROPERTY TAXES AND WE PAID FOR OUR LAND. IM STILL GRATEFUL FOR THE MONEY JUST CANT UNDERSTAND HOW THE GOVERMENT HAS TO STICK THERE NOSE IN EVERYTHING.WE SIGNED BACK IN DEC 2011.
Just to let you know that the 1099 that we recieved last year from Shell listed the bonus as "rent income" . This made the tax that was paid a lot less. For the 3 family members the tax rate was 8% to 22%. Taxes are paid and we are happy. We were told to expect 33% in taxes but each case stands on own.
IM HOLDING MY BREATH ON HOW MUCH TAXES WE WILL HAVE TO PAY IM HOPING FOR THE SAME GOOD NEWS YOU GOT PRESTON JOSWIAK .I WILL FIND OUT TOMMOROW NIGHT IF THEY WILL TAX US TO DEATH.I WAS ALSO TOLD TO PAY TAXES IN FULL OR THEY WILL PENALIZE ME?
Can any property maintenance be ducted from the bonus checks? If you buy a tractor to maintain the property, can you depreciate the cost of the tractor?
If you're a farmer growing a crop for profit, then you would get a deduction for depreciation expense. But you amortise it, probably through a straight line method. You're only going to be able to write off the cost of the tractor against the profit it produces.
Mark: I've been to seminars where it was stated that farmers(not hobbyists) can do maintenance like a new roof or painting to farm buildings and write it off. They said if you were planning on doing such work in the next couple of years to do it the same year you received your bonus so that you can deduct it. But don't do such things if they aren't truly necessary.
I'm no CPA...get professional advice.
I personally know a farmer who did by a tractor with his bonus money for tax write off, I dont know the details but I do know he saved a substantial amount of money. A good tax accountant is worth paying for.
A farmer can generate a loss in the farm to help offset the oil & gas income they received. One of the ways to generate a loss is through the use of depreciation, in particular bonus depreciation. Currently in 2012, a business can expense 50% of the cost of new equipment and other property with a depreciable life of 20 years or less. For farmers, this would also include buildings and grain bins. The key to this provision is it applies only to new property. Obama has talked about making it 100% like it was in 2011, but there probably won't be anything done until after the election. Any farm upgrades, whether it is equipment or buildings, should be considered this year to match the bonus payment. Next year, the bonus depreciation goes away, at least as the law stands.
The important thing for farmers to keep in mind is the oil & gas income is reported separately from their farm income, so the income is not considered when determining if Section 179 applies.
Hey Steve--I have a friend who owns 137.5 acre farm and does not yet belong to CAUV. Her son has been fitting it and planting for the past two years. Would they have to wait another 3 years to be eligible for CAUV? My friend has 2 lease agents lined up. Before she chooses she is trying to put things into place to minimize the burden of taxes. Wish we had the incite the wealthy do at sheltering their money.
Sorry for the delay responding to your question. I have been in the fields the past week trying to get crops planted. I would contact the Trumbull county auditors office to see what paperwork you need to file to get the property reinstated. I've only had to go through the renewal process for the property I own. The Trumbull county renewals must be turned in the first week of March, so any changes won't happen for at least another year.
Keep in mind if drilling does occur on the property, this could cause you to lose the CAUV status. Hard to say whether the auditor's office will still view the entire property as "farm use" property if it has a well or part of a drilling unit. If your friend is able to get CAUV status for the farm, I would encourage her to include some language in the lease requiring compensation from the driller if the property loses its CAUV status due to oil & gas activity.
If you have questions, please let me know.
On a 137.5 acre farm, drilling is not going to cause you to lose CAUV on the entire farm. You will probably have to exclude the few acres affected by the drilling operation, but the rest of the acreage that is in ag production can remain in the CAUV program. Consult a good tax adviser. You shouldn't be farming and paying full bore real estate taxes on your production acreage - that is just a bad business decision.