Tax Tip

Remember: Internal Revenue Code Section 179 was amended for 2008 to allow the expensing of up to $250,000 of machinery and equipment purchases (more in some areas).

Land Auction Results

A farm land auction was held in Stuart, Iowa on June 30, 2008. Here is my analysis:

Parcel 1: 240 acres; crop acres 224.4; FSA corn yield 108; CRP acres 10.5;

ave CSR 60.66; $3,750/acre; $61.28/CSR pt

Parcel 2: 198 acres; crop acres 169.5; FSA corn yield 117; CRP acres 15.6;

ave CSR 56.08; $3,575/acre; $63.84/CSR pt

Parcel 3: 155 acres; crop acres 150.7; FSA corn yield 106; CRP acres 0.7;

ave CSR 62.61; $4,000/acre; $63.89/CSR pt.

Parcel 4: 130 acres; crop acres 115.9; FSA corn yield 108; CRP acres 9.7;

ave CSR 52.94; $2,950/acre; $55.72/CSR pt.

Other factors: Tile & terraces; Parcel 2 included 15,000+bu of grain bins and drying system; Parcel 4 bisected by creek

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All opinions expressed are strictly those of the blog author.

Iowa Crop Land Cash Rent

We had a cash rent auction for 312 acres of cropland with an average CSR of 69.52. It is an unusual way to set rent, but required in this instance because the land is held by an estate with litigating beneficiaries. The auction started at $310 per acre and ended at $334 per acre-- by far the highest rent in my practice. It is even higher when you consider that the 312 acres includes 5.1 acres of required waterways and another 5.5 acres of permanent pasture and hay ground. The crop acres will be planted to corn. High prices, high yields and high crop revenue insurance are required for that kind of rent price to make sense. Good luck to all the farmers out there. This year has the makings of a higher stress growing season than usual.

ISU cash rent survey

Tax Tips

1. With the slowing of the economy and the contraction of the housing industry, I am seeing a sharp increase in people tapping into their 401K, IRA, or other retirement accounts. This is a risky thing to do. Not only are these folks losing their retirement nest eggs and the tax deferred compounding that is the secret to having a comfortable retirement fund, they often do not have enough taxes withheld and are greeted with a hefty tax bill the following spring. This is because, in addition to the 10% penalty for withdrawing the funds early, taxpayers are often bumped up into a higher tax bracket or lose tax credits, such as the child tax credit. If you absolutely have to have the money, consider borrowing the money with the retirement account as collateral so that you do not have the distribution penalty and are disciplined to pay the funds back. Be aware that there are regulations restricting how you can borrow against your retirement plan and that you will be in the same tight spot, paying taxes and penalty, if the lender has to foreclose on the retirement fund.

2. Here's another scenario: Retiree is taking a regular withdrawal from his investments. He is taking out about the same amount as the funds are generating in interest, dividends, and capital gain. However, he is being ripped off. Here's why: His funds are primarily invested in dividend-generating stocks and the stocks are set to reinvest the dividend. Normally this is a good practice. It helps you compound your investment and the investment is usually free or very low cost. However, since the retiree is drawing funds out of the account, he should take distribution of the dividends instead of paying his broker fees for liquidating stock to make his distribution. It also makes for an accounting nightmare as the basis of each stock is constantly changing with all the purchases and sales of irregular numbers of shares.

3. If you are thinking about buying an annuity, please, please, talk to your tax adviser first, particularly if you are over 65. Whatever you do, do not get tax advice from the guy who is going to get a big commission for selling you the darn thing.

Good luck with your taxes ("the cost of civilization," as OWH said).

from Johnston High Announcements

ANNOUNCEMENTS
THURSDAY, FEBRUARY 28, 2008
TODAY IS AN “A” DAY

☺ CONGRATULATIONS go out to the Mock Trial Team A/B for their work at the Dubuque Mock Trial Invitational last Saturday. The team, consisting of freshman Ananya Kumar, Jake Hanson, sophomores William McDowell, Yiming Qin, Daniel Ratekin, Yelena Varley, John Temple, juniors Neal Herink, Alma Jovancevic, Huzzaifa Mohammad, Sarah Engstrom and Brittany Deal, won the Civility Award for outstanding professionalism (emphasis added.).

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