BONUS MONEY!

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.

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Permalink Reply by john p halloran on May 23, 2012 at 7:12am
Well put Turkey Leg !!!! Go Turkeys.......
Permalink Reply by PRESTON D Joswiak on May 8, 2012 at 2:10am

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. 

Permalink Reply by CATHIE on May 8, 2012 at 8:00am

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?

Permalink Reply by owner on May 8, 2012 at 8:14am

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? 

Permalink Reply by Chartist on May 8, 2012 at 12:58pm

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.

Permalink Reply by Jim Litwinowicz on May 9, 2012 at 2:41pm

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.

Permalink Reply by Steven Kacerski on May 10, 2012 at 7:56am

Mark,

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.

 

Permalink Reply by Tanya Gabriele on May 19, 2012 at 5:45am

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.

Permalink Reply by Kathleen on May 20, 2012 at 1:48pm
Hi,
In columbiana county this property might not have to wait any longer since its been two years. When we filled for woodland cauv there is a small window every year to do so. I think it was a few weeks or less in march. I missed that window twice!
When I was doing this years ago someone bought 500 acres and took the county to court making a case that there was no reason to wait and it was an unfair burden. I'm pretty sure he own so the wait law may have changed due to that but I don't think so. I find this wait to be a sneaky way to collect more taxes and I was shock to find out it existed. Our taxes went so low the year it took effect and to think if all the games weren't played we would have had that reduction years earlier.
Permalink Reply by Steven Kacerski on May 22, 2012 at 3:17am

Tanya,

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. 

Permalink Reply by Finnbear on May 22, 2012 at 5:56am

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.

Permalink Reply by Steven Kacerski on May 22, 2012 at 6:32am

Finnbear,

I agree with you, but we don't know how the auditor's office will view these new wells.  They may not take any acres out of CAUV, only take out acres that consist of the well site or the whole property.  I was at a seminar early this year and the speaker stated each county's auditor may view the oil & gas activity differently.  You could have one county auditor leaving all of the land in CAUV since the main activity of the overall property still relates to farming. A neighboring county' auditor could reassess a portion of the acreage (ex. well pad) and tax it at a higher rate, but leave the rest in CAUV as you mentioned.  Either way, that is why I think it is important for a landowner who has property in CAUV to have a provision in their lease that would provide them with compensation for any acres kicked out of CAUV due to the oil & gas activity. 

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