All Forum Posts by: Anthony Halstead

Emilio,

Money is being printed (created out of thin air with no backing) at a crazy rate. Debt must be paid for, and there is too much debt to ever be paid. Politicians want to kick the can, try to delay the inevitable default so they can get re-elected, thus they are all in support of "stimulus". Look where the money goes: to banks which are still broke and will still need more (because they pay the politicians to get the money, best investment ever), to stocks, timberland, precious metals, commodities. You are seeing that money needs to go somewhere because if you just hold it it declines in value (that is what printing does to the value of dollars, inflation). Timberland, commodities, metals and to some degree stocks are all being bought not because people think the economy is improving (tho some do... despite all evidence being to the contrary) but because they are trying to buy real assets which do not decline in value relative to the dollar and hopefully maintain or appreciate in value. It is the early stages of a hyperinflationary boom right now, when the common man on the street figures it out (likely will not figure it out, will just instinctively go buy stuff to get rid of his paper dollars) then it will be near the end.

Read "When Money Dies", you can google it and find it online. This has all happened before, people do not change, history does not repeat but it sure rhymes...

Learn what happened before, do not say "it cannot happen today, we are too smart, too interconnected, "they" wont let it happen", etc. Think critically, analyze information, do not listen/ watch/ read mainstream media as they are at best misinformation cheerleaders and sometimes pump and dump crooks or worse (see Faceflop, or Faceplant, or whatever you wish to call it for most recent example, or just watch Cramer...)

Learn history, learn to think, compare. Understand that human motivations do not really change, thus actions and results can be predicted to some extent and that is why history seems like it repeats.

Tony

Interesting, gold and silver still get almost no recognition. Bubble phase? not yet...

Tony

Just curious, how many people do you know that own and control (have possession of) gold or silver? Paper, contracts, shares, ETFs excluded, we are talking only about the heavy shiney stuff.

Just an informal poll...

I will start and say that two years ago it was 6, and now it has grown (same group of people) to 13-14 that I know of. People have found reasons to buy.

Tony

Thanks Steve,

I understand depreciating real property, ie assets depreciate and thus are deductable.

I just wonder if there is a strategy out there to overcome this minus of land not being depreciable, deductable, thus costing more than renting.

I am at the point where it makes much more sense to rent land than to purchase more.

Example: Purchase 100 acres at 4500 per acre. Total cost: 450,000. If you finance the total it is 2698 per month (6% / 360). Taxes are about 3000/year, so total yearly cost is 35,376.

If you rent a similar size you may pay 150 per acre/year, and you do not need to pay taxes. So your total yearly cost is 15,000 per year. Plus this is an expense against income.

Do you see where I am coming from? I would like to purchase more land, but do not see the point when I can get 3 times the acreage if I rent the land and have some (small) tax advantage.

Any ideas here, or is the best just to rent the land as I am now at?

Looking at it from a long distance it seems that land is too expensive and rent is too cheap?

Thanks to all for their input,

Tony

Thanks Bill,

I guess where I kind of wonder is this:

If I buy a tractor or some other piece of machinery vital to my operations, I can offset income with that, as it is a cost of doing business. This is true whether I buy or lease, I can (rightfully so) show it as a cost.

I apologize if I am coming across as dense, I am not an expert on taxes or entity setups, so thanks for the assistance here.

I just wonder what is the difference between a piece of equipment (rented or bought) vs land. One could argue that both are assets, but the treatment of both is much different.

I wonder why land is treated different?

You see, if I am going to start farming, I need land. I must either buy it or rent it. If I rent it, I have a cost which I can use to offset income. If I buy it, I cannot depreciate it (land) and I can only deduct interest and taxes. Net net, buying is much more expensive. Is there any way around this (where the cost of buying land for business is factored in as a cost) or is it just best to rent the land in this type of situation?

Thanks,

Tony

The difference is here:

If one owns the land, you cannot deduct it as a cost of business. If you rent the land, you can deduct the cost of the rental payments as a cost of business.

If you rent from someone else, you get a "tax benefit" but net less due to the cost of the rental, but typically your payments on land you own are higher than rental rates... and you cannot deduct them in an agricultural operation.

Just trying to get some kind of way to deduct those cost, they are a real and fixed cost.

To me it does not make sense that you can spend a million on land (which you very much need) and cannot deduct this very real cost, while if you rent the land you can deduct the rental payments.

If there is not a legal way around this the best thing is to rent, not own land...

Suggestions?

Tony

Oh, and if you own you need to pay taxes, while renting does not incure that expense.

thanks Jon,

Where the difference comes is if I own the land I farm, I cannot assign a cost (deduction) to the land I use, whereas if I rent it then I can deduct that expense.

I gather from your response that I can rent from my LLC, it is a wash costwise but from a taxation standpoint I can now deduct the rent from income and show a lower net profit.

Thanks,

Tony

Apologies for resurecting an old thread, however this one has lots of useful info and comes closest to the question I am asking.

I have a farm with option to split off an existing building (one of two) and rent that out, so I then have two properties, live in one, rent out the other. They are contigious, at this moment one property. Basic thus far, now come the details:

I plan to deed that rental property to my LLC and then rent the farmable land on the rental property from the LLC. Is that rental payment counted the same as the house (renter) rental payment? Is that rental fee paid my me for grazing rights counted as an expense, or is the IRS going to cry about this?

The reason I question about this is that if I own the land I cannot deduct the cost of it as an expense, but if I pay rental fees then I can deduct those fees...

Advantages? Disadvantages? Suggestions?

Thanks,

Tony

Thanks Jon for the link, I was in a hurry.

Yes, the comments are very different...

Here is an interesting article (discussing what many of us are already noticing) showing graphically the rate of change for homeownership and renters.

Note the expected increase in demand for rentals anticipated due to ramped up activity by banks to foreclose and evict long term delinquant residents.

http://www.zerohedge.com/news/new-normal-american-dream-renting-about-become-very-expensive

Tony