|
Iowa | 1) Leasing (to own) a commercial building works great if you can afford the payments and are making money so the deduction is important, 39.5 years is terrible as far as depreciating a building. We farmers are spoiled in that we can generally set up payments for a similar time period as the depreciation ( For instance, a 7 year loan on a building that depreciates on a seven year schedule)--I didn't know that farmers had a good deal that way.
2) If a beginning or cash-strapped farmer is leasing, he is probably not getting the largest benefit--the 100% deduction, because he is most likely in a low tax bracket. Leasing lets him drive something newer than he can afford to own, but there is a large cost.. I say this because if a guy takes his time, he can find a very good, low-hr older tractor that could be owned for way less money than a lease and he would have something to show for his $$. Sure, there COULD be breakdowns, but nothing ventured=nothing gained, and if you are careful you can find one with a very low probability of costly breakdowns. The lease is safe but the price you pay for safety (no expensive breakdowns) seems pretty large. Which mirrors life in general--"safe" almost always equals greater costs or lower returns.
3) If a farmer has a large acreage on a one-year lease, and he can't hire enough help to keep his existing equipment running around the clock, leasing some machinery makes sense, but I really can't see another scenario where it would. I'm not doubting at all the value of leasing something you only need temporarily, that's good business, but I still wonder about leasing a similar item year-after-year.
4) If the farm credit deal on bins, buildings, etc, can be properly structured so it costs no more than a purchase, then it looks pretty good. But, as someone said, this is really a purchase just CALLED a lease, and is way different than leasing a tractor for a season.
5) On a one-year lease on a tractor, you had better MAKE REALLY GOOD MONEY WITH IT since that is all you have to show for it one it goes back. This is of course quite possible, but I doubt probable. And then, you have the same cost next year--you never get something paid for which can reduce your costs.
6) With the CRAZY cost of used equipment right now, we may be in an anomaly where leasing might work. But, then again, I assume the high current cost of the machinery is the starting point for the lease as well, so maybe that's a wash.
7) I can see how leasing will gain favor if the 100% expense deduction does indeed fall to $25K Jan 1.
8) I've never seen a case where more fingers in the pie doesn't cost more money, but what do I know?
Thanks to everyone, I learned a lot!
| |
|
Leasing question
