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southern MN | I think they got themselves behind the 8 ball by using money that was available in several directions that has created a snowball of a trap. Every year it rolls up a little bigger, and a little bigger.
Now here they are, they don't have any way to get away from the snowball. They can't show tons of income even of they had some, because it all goes to taxes now.
They can't use depreciation to lower the tax bill on any future income because they used that all up early.
The forecast is for poorer farm income the next 24 months so its not realistic for them to grow themselves out of the problem of today, even if they were willing to pay the higher taxes and all.
In the good years they bought shiney with equity and avoided taxes with early depreciation. This sucked out all positive gains and I bet it felt like they were on top of the world, siting on a mint.
Now they are left with all the bad sides of those transactions, in an ecconomy that is going bad.
There are not many places to turn any more. It will take a whole new outlook and direction.
Most of us use the tax tools that are available to is, and so did they.
This might be a case study in how the 1980s happened to many many farmers; and what happened to Illinois Family Farms, and Stamp Farms.
It all looks good any one year and it was using the tools available, but no one looked out for the long term where it will lead?
I thank him for sharing this painful topic and following up on several threads, these discussions can often go in a bad way and people say things poorly, it is hard to talk about this stuff.
Farm ecconomy always has cycles, and we have come off a monster wave. If we look at the past, most bad cycles in farming are created by such a good wave right before.
Something for all of us to think about. Even if we have been on a modest path, our neighborhood might suffer some big hardships that we will be a part of one way or another.
One of these years, prepay might turn into a disaster, for example..... Are we able to see that in time, and will we be able to change our tax and buying plans to step aside from the potential problems of prepay?
Paul | |
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Depreciation
