Year-end tax planning complicated by inputs and equipment shortage

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Because several equipment makers have said they won’t be able to deliver until spring 2022, the concern is that prepaid (seeds, fertilizer, and chemicals) will be in demand. We have heard that several input dealers are asking farmers to take possession of the prepaid cards by the end of the year. I think the problem is they are going to oversell prepaid and due to delivery issues farmers may not get prepaid when they need it.

Q: Why is this important from a tax point of view?

A: The question is whether there will be enough entries for everyone. The concern is that retailers could oversell the supply. A lot of the input people say they will sell it to you, but you have to take delivery of it, otherwise they cannot guarantee that you will get it when you want it. From a tax point of view, this is technically not prepaid because the inventory has not been allocated to you. Therefore, it wasn’t yours, it was basically just a deposit.

Will the IRS attack this stuff? Probably not, as the bills will look like they’ve been prepaid, but retailers are probably scared right now to think about what will happen if they are sued because a farmer cannot get their money. seed on time and must sow late and now there are harvest problems. (If you plan to store pesticides this winter, here are four tips to make sure you do so safely: https://www.dtnpf.com/…).

We started encouraging customers to start planning their prepaid in October, assuming that by December, prepaid might be gone. If you wait too long and the entry guys say you need to take delivery – once the inventory is out I don’t think they’re going to do prepaid. They’re going to say, “Sorry, it’s all sold. We don’t know if we’re going to bring him in.” And just like that, you’ll need to collect another half a million dollars in income from your taxes.

Q: Do farmers have any other alternatives if their prepayment plans fail?

A: With crop prices, those who don’t plan for postponement and other things might end up having to pay extremely high prices for second-hand equipment at auction, all to avoid taxes. Why buy one year old equipment for the brand’s price, while making new equipment? But they’re going to be forced into a situation where, unless they want to pay the tax, they’re going to have to be aggressive about year-end equipment purchases.

Katie Dehlinger can be reached at [email protected]

Follow her on Twitter @KatieD_DTN


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