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| Volume 4,
Number 11 November 1998 |
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This Month in Ag Connection | |||||
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Publishing Information
To send a message to an author, click on the author's name at the end of an article.
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[This Month in Ag Connection] [Ag Connection - Other Issues Online] Missouri Fence Law
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| [This Month in Ag Connection] [Ag Connection
- Other Issues Online] Certification a Must to Market Pork
As of January 1, 1999, most pork packers will not buy hogs from producers who do not have Pork Quality Assurance Level III certification. Why? The pork packing plants have discovered the PQA Level III provides an ideal vehicle to bring USDA Hazard Analysis and Critical Contact Points to the production end of pork. USDA’s food Safety Inspection Service established this new regulation earlier this year. Meetings to certify producers are scheduled as follows:
For more information, contact your county extension center. Author: Bill Buehler, Farm Management Specialist |
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| These are some of the tax provisions in the "Taxpayer Relief Act of 1997" and the "IRS Restructuring and Reform Act of 1998" that farmers will want to review with special interest.
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[This Month in Ag Connection] [Ag Connection
- Other Issues Online] Band-Aid Income Tax Relief and ReformIncome Averaging: This provision is available only for individuals "engaged in the business of farming". The carry back period is three years. The dollar amount of farm income to average is electable. This provision will only be in effect for three tax years (years beginning after December 31, 1997 and before January 1, 2001). Gains from the disposition of property (except land) regularly used in the farming business are eligible for averaging. The averaging of farm income will not apply for the computation of alternative minimum tax or calculation of self-employment tax. Capital Gains: For 1998, an individual taxpayer can have tax rates on long term capital gains of 28%, 25%, 20%, and/or 10%. The holding period to qualify for long-term gain was reduced from 18 months to 12 months for sales or exchanges after December 31, 1997. The holding period for livestock continues to be 24 months or more for cattle and horses, and 12 months or more for other eligible livestock. Home Office Deduction: The definition of principal place of business for the home office deduction has been expanded. This rule change will be beneficial for many farmers, particularly those who do not reside on the farm property. However, the change in the definition does not go into effect until after December 31, 1998. Self-employed Health Insurance: The '97 Tax Act provides for the eventual 100% deduction for health insurance for self-employed taxpayers. The increased allowance is being phased-in (45% deduction in 1998 and gradually increasing to 100% by 2007). Deferred Farm Sales: The differences in calculating tax liability on installment sales for regular income tax and the alternative minimum tax (AMT) were eliminated. This provision is retroactive to dispositions of farm property for tax years beginning after December 31, 1987. "ROTH" Individual Retirement Account (IRA): While no deduction is allowed for ROTH IRA contributions, all qualified distributions of the original contributions and account increase resulting from appreciation, interest, and/or dividends are tax-free. ROTH IRAs are particularly valuable as an estate planning tool. There is no mandatory distribution or contribution cessation based on the age of the contributor for ROTH IRAs. Child Tax Credit: For 1998 the credit is $400 per child under the age of seventeen and increases to $500 after 1998. There is a phase-out of the credit for taxpayers with income above certain amounts. Hope Scholarship Credit: For the first two years of post secondary education a family can claim a maximum Hope credit of $1,500 per student per year. This credit is calculated at 100% of the first $1,000 and 50% of the next $1,000 of tuition and related expenses paid after December 31, 1997. Credit is phased out as modified adjusted gross income increases above $40,000 ($80,000 for joint returns) and is not available to married taxpayers filing separately. Lifetime Learning Credit: This is available for qualified educational expenses to acquire or improve job skills. It applies to expenses paid after June 30, 1998 for an academic period beginning after that date. The credit is 20% of the first $5,000 of qualified expenses through 2002, and the first $10,000 thereafter. The credit is applicable to college juniors, seniors, graduate students, or working taxpayers pursuing job skill training. This credit is phased out as modified adjusted gross income increases above $40,000 ($80,000 for joint returns) and is not available to married taxpayers filing separately. Author: Parman R. Green, Farm Business Management Specialist |
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| "A good lease is defined as one in which both the tenant and landlord are satisfied." |
[This Month in Ag Connection] [Ag Connection -
Other Issues Online]Farm Leases -
What's Fair?
A good lease is defined as one in which both the tenant and landlord are satisfied. The income and expense splits or the amount of cash rent should reflect each party's contribution, expected returns and amount of risk incurred. Most landlords and tenants quickly agree on the general terms of a farm lease. However, customary crop shares or average cash rents may not be applicable for everything involved in the rent of a specific property. The landowner may have property improvements that are a benefit to the tenant and the tenant may be able to provide services valuable to the landlord. The benefits provided by the landlord and the services provided by the tenant should be agreed upon prior to signing a lease. Landlord provided benefits. These can be contributions of the landlord or characteristics of the property that might make it more valuable. Whether they have rent associated with them, will depend upon the benefits provided and how useful they are to the tenant. Some property or improvements may not be useful to the tenant. While ponds, dwellings, and other facilities might add to the market value of the property, if the tenant doesn't need them, they add nothing to the rental value. The tenant may also not be interested in maintaining these improvements. The best solution may be to separate them out of the lease, lease them to someone else, or compensate the tenant for maintaining them. When improvements have significant value to the tenant, they should be included in the rent agreement. Some improvements benefit both the tenant and landlord, like a grain bin storing shared crops. Another example is a separate gravel driveway to provide the tenant with better access to the farm. However, if the landlord or someone besides the tenant lives on the property, the driveway would also provide privacy for the dwelling. Rent is seldom adjusted when both parties benefit from an improvement, unless the benefits are much greater to one party than the other. Tenant provided services. Most leases assume that the tenant won't abuse the property and will provide some maintenance. But how much maintenance? Typically, the landlord provides materials for building or fence repair and the tenant provides unskilled labor. Routine maintenance to terraces, waterways, ditch crossings, etc. may also be the tenant's responsibility. Major repairs or repair work requiring special skills or equipment is normally a landlord expense. Who or what determines major repairs and how they are handled should be agreed upon in advance and made a part of the lease. Some services may need to be negotiated and included in the lease. For example, if the landlord wants weeds around unused buildings and the roadsides mowed, then this should be agreed upon in advance and included in the lease. Trades. In some cases trading benefits for services (or vice versa) is a good solution. One example is letting a tenant use a grain bin and dryer rent free in exchange for the tenant making repairs to it. Both parties benefit. Another example would occur where the tenant mows roadways and around buildings in exchange for the use of a machine storage building. The tenant might also have specialized skills or machinery. For example, a tenant with earthmoving equipment might be able to make major repairs to terraces and rent adjustments could compensate for these services. Traditional rent practices change some with time. In the past, lime has been considered a landlord responsibility since it is a long term expense and a part of basic soil fertility. While this is still true, more and more landlords have been reluctant to spend money on lime. One solution to this problem is for the tenant to go ahead and provide the lime. However, if the lease is terminated, the tenant should be compensated for the remaining benefits of the lime. This is usually done by amortizing the cost over a period of years and reimbursing the tenant for the remaining value. The same might apply to fertilizer applications to correct very low phosphorus or potassium soil test levels. This could also apply to other property improvements made at the tenant's expense. Changing farm practices could affect rents. When tenants adopt no-till practices, some landlords have argued that rent shares should be adjusted to reflect reduced costs for the tenant. This may or may not be the case. Some costs are reduced, but the tenant may have to invest in new equipment and additional management is required. In addition, the landlord may also receive some of the production benefits from no-till and the property is better protected from erosion. The decision to adjust rents should not be made until contributions and benefits for both parties are considered carefully! Insurance. The landlord is usually responsible for insuring against casualty loss on the buildings and property. The tenant should insure his machinery, grain and livestock kept on the landlord's property. Crop insurance is often up to each party and the risk they want to assume. Both should carry liability protection! Use a written lease! The best way to avoid misunderstanding and make sure everyone agrees is to use a written lease. Sitting down and preparing a written leases also "forces" everyone to think through and discuss all of the issues involved. In addition a well-written lease provides legal protections for both the landlord and tenant. For more information on farm leases or sample lease forms, contact an extension farm management specialist or the county University of Missouri Extension Center. Author: Melvin Brees, Farm Management Specialist |
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| [This Month in Ag Connection] [Ag
Connection - Other Issues Online] Grain Storage Listing
The MU AgEBB
(Ag Electronic Bulletin Board) has started a listing for grain storage. It is intended to
facilitate those with storage to rent and those that need storage. It works similar to the
electronic hay listing.
Persons with Internet access from their home can look at the web page at http://agebb.missouri.edu/storage/ |
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| [This Month in Ag Connection] [Ag
Connection - Other Issues Online] Commercial Ag to Host November Institute
"Taking Advantage of Opportunities" is the theme of the 1998 Commercial Agriculture Institute, Nov. 11-12, at the Ramada Inn, Columbia. The institute is designed to be of interest to swine, dairy, beef and crops farmers. Programs each day will include sessions of value to any type of farming operation, as well as concurrent sessions on commodities. Keynote speaker Dennis Avery will address the question, "Can We Seize the Greatest Opportunity in Farming History?" For more information, contact your county extension center. [This Month in Ag Connection] [Ag Connection - Other Issues Online] |
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