Income Tax Effects on Beef Cow Replacement Strategy
| Autor: | Ronald D. Kay, M. Edward Rister |
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| Rok vydání: | 1977 |
| Předmět: | |
| Zdroj: | Journal of Agricultural and Applied Economics. 9:169-172 |
| ISSN: | 2056-7405 1074-0708 |
| DOI: | 10.1017/s0081305200013674 |
| Popis: | Little work has been done on the effect of should be considered when deciding whether to buy income taxes on the firm-level decisions made by or raise replacement heifers and what the replacement farmers and ranchers. Krause and Shapiro [4] identi- interval should be. fied this gap in agricultural economic research, noting Under the current (1976) tax regulations, owners that much of the published work on income taxes is of beef cow herds who buy replacement breeding descriptive rather than an analysis of the effect on stock receive tax advantages from investment credit, firm level decision-making and resource allocation. additional first-year depreciation and regular depreYet farmers make few investment or production ciation. Investment credit is equal to 10 percent of decisions which do not affect their income tax the purchase price if a useful life of seven years or liability for one or more years. more is assigned to the replacement. This amount is An exception to the usual practice of omitting reduced if useful life is from three to six years and income taxes from a research study is a recent article none can be taken if useful life is less than 3 years. by Lin, Dean and Moore [5]. They used quadratic Purchased breeding animals are eligible for additional programming to derive an E-V (expectation-variance) first-year depreciation equal to 20 percent of the boundary for after-tax income on several large purchase price provided a useful life of six years or California farms. Both the level and curvature were more is used. Regular depreciation can also be taken different than for the E-V boundaries based on on purchased breeding stock. A fast depreciation before-tax income. This implies that maximizing method can be used if a useful life of three years or utility based on after-tax income may result in a more is assigned and the purchase is a new rather than different farm plan than when using before-tax a used asset.' These three items result in a rather income. Chisholm [2], in an article commented on marked effect on the amount of income taxes due the by Kay and Rister [3], reported the income tax year in which a replacement is purchased with some effects on the optimum replacement age for farm effect in later years as any remaining depreciation is machinery. Both articles found income tax regula- taken. tions tended to reduce optimum replacement age, The cow-calf producer who raises his own re |
| Databáze: | OpenAIRE |
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