Legacy nutrient deductions

[Howboutthemdawgs]

Ever heard of this? Received a packet in the mail today. This stuff is so above my pay grade but I do enjoy saving money

 

[T-Max]

Government incentivizing poor management now?! Sounds about par for the course…


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[T-Max]

I kid, but I heard on another forum that you could claim depreciation on your soils themselves. I wonder if that is what this is?


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[Howboutthemdawgs]

My soils suck so I’m guaranteed top dollar.

 

[Turkish]

If it’s what I think it is, it lets you write off fertility loss. So if your fertility was poor when you bought, it’s not much help.

The Land podcast is sponsored by a similar group.

 

[Howboutthemdawgs]

If it’s what I think it is, it lets you write off fertility loss. So if your fertility was poor when you bought, it’s not much help.

The Land podcast is sponsored by a similar group.

I wonder how they know? I would assume it wasn’t world class Iowa soil but it’s definitely gotten worse just by virtue of erosion over the last four years

 

[Turkish]

I wonder how they know? I would assume it wasn’t world class Iowa soil but it’s definitely gotten worse just by virtue of erosion over the last four years

I think you have to have certified testing/documentation done when you acquire the property. It sounds to me a little like a timber basis.

 

[hillrunner]

I did this last year on a couple new pieces. I had the coop do grid sampling and write up a report listing the excess soil fertility present in the soil. My accountant handled it from there. It's a hefty deduction.
some guys in Iowa are writing off $2,000 an acre on high quality ground.
it's a section 180 deduction.

 

[westonwhitetail]

Why don't they have a program that rewards improving the soil? Your organic matter increased from 2 - 4%, nice management, here's your check. Is this just giving farmers a discount on land without incentivizing/requiring good management practices?

 

[Turkish]

Why don't they have a program that rewards improving the soil? Your organic matter increased from 2 - 4%, nice management, here's your check. Is this just giving farmers a discount on land without incentivizing/requiring good management practices?

This is a tax code thing, not a USDA or conservation program. Technically, there’s an inherent benefit to the owner from fertility increases from the objective increase in property values that come with it. This is a write off of an “expense” associated with production. It’s not anything that’s applicable to me, but the logic of it makes sense, I suppose.

 

[westonwhitetail]

This is a tax code thing, not a USDA or conservation program. Technically, there’s an inherent benefit to the owner from fertility increases from the objective increase in property values that come with it. This is a write off of an “expense” associated with production. It’s not anything that’s applicable to me, but the logic of it makes sense, I suppose.

I probably don't understand it well enough to knock it. But it seems like its rewarding poor behavior and things should be set up the other way around.

 

[SD51555]

Let's hope the IRS doesn't require follow up testing during a warm year with good moisture. Could result in a bad tax bill the other direction.

 

[Hoytvectrix]

I probably don't understand it well enough to knock it. But it seems like its rewarding poor behavior and things should be set up the other way around.

In some ways it's also promoting the conservation of mined resources like phosphorus and potassium that are mined to make fertilizer. I don't think it is necessarily promoting the draw down of nutrients, but compensating farmers for a depreciation in their asset when they otherwise would not have been.

 

[T-Max]

Nothing like the US tax code allowing you to depreciate an almost universally appreciating asset.


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[Brian662]

Nothing like the US tax code allowing you to depreciate an almost universally appreciating asset.


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Right.

Play their game or pay them more of your money. That's the way I've started looking at it several years ago.

 

[Turkish]

Nothing like the US tax code allowing you to depreciate an almost universally appreciating asset.


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Soil fertility in production ag is universally appreciating?

 

[T-Max]

Soil fertility in production ag is universally appreciating?

Are farmers doing fertility tests to determine whether or not to buy a piece? Or is the asset (land) going up regardless?


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[Turkish]

Are farmers doing fertility tests to determine whether or not to buy a piece?

 

[T-Max]

And they are paying less for properties over time because the nutrients are diminished? I guess I misread what the market on ag land has done over the last 50 years.


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[T-Max]

I guess my point about the ridiculousness of the tax code was missed. Never mind…


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