Volume 12, Number 9
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New Generation Cooperative Investment: Gain or Loss on
It is becoming increasingly common for producers to have investments in new generation cooperatives. From questions that are beginning to surface regarding the tax treatment of gain or loss if a producer sells some or all of their investment in a new generation cooperative, there appears to be some confusion on tax treatment of these sales.
Some tax preparers have suggested that if there is a requirement that investors have to be a producer – the gain or loss on disposal of the investment should be reported as a Section 1231 ordinary gain or loss (not Section 1221 capital gain or loss). Section 1221 provides for long-term capital gain or loss treatment.
Dr. Neil Harl, a noted ag economist and attorney, indicates in an Ag Decision Maker article that cooperative stock does not fall within the definition of ‘property used in a trade or business’.
Code Section 1231 provides “The term ‘property used in the trade or business’ means property used in trade or business, of a character which is subject to the allowance of depreciation provided in section 167, held for more than 1 year, and real property used in the trade or business, held for more than 1 year ….”
Further, Harl reminds us the IRS Code provides that all assets are considered to be capital assets other than for specific exceptions. The exceptions are:
Given cooperative stock does not
appear to fall within any of the above exceptions, gain or loss from the
disposal of stock in new generation cooperatives should qualify for Section
1221 capital gain or loss treatment.
Alfalfa Stand Evaluation Timing
Early September is a good time to make alfalfa stand replacement decisions on existing fields. The stand should be evaluated on plant density, stem density, weed competition and crown and root health.
Stem density is better than plant density as an estimator of yield. Stem density is easiest to count after plants are 4 to 5 inches tall. Make a one foot square out of wire or wood. Drop the square randomly in 10 to 15 places to get an average stem count and a plant count. Count only robust stems which will be cut by a mower. Ten stems per square foot have been shown to yield about 1.2 tons of dry matter per acre in University of Wisconsin trials. These researchers found an almost linear yield response to stem counts to 50 stems per square foot yielding 5.5 tons per acre.
To evaluate crown and root health, dig the top 6 inches of a crown at three random locations per ten acres. Evaluate the crowns for size, symmetry and split the root lengthwise. Use the following chart to categorize each plant.
Individual plants approaching 50% root rot (rating 4) will probably not survive a normal winter. Healthy stands have fewer than 30% of the plants in categories 3 and 4. If you have a high percentage of these plants you should consider rotating the alfalfa stand.
In conclusion, plant counts decrease slowly as the stand ages. As stands thin, the crowns spread to produce more shoots. This partially offsets the loss of plants and maintains the stem density above 35 stems per square foot, which is a density sufficient to maintain high yield in Mid Missouri. However, as stands grow older and naturally thin, weed control and good fertility become increasingly important to maximize crown size and stem production, slow plant death, and maintain reasonable productivity. Scouting fields gives additional information to make informed decisions.
(Author: Rich Hoormann, Agronomy Specialist; Source: Southwest Center RUMINATIONS, Vol. 5, No. 1; University of Wisconsin-Extension Publication A3620.)
MoDOT, MDA Waive Fees For Hay Hauling Permits
Extreme weather conditions this summer have resulted in a widespread hay shortage. The Missouri Departments of Transportation and Agriculture are working to help Missouri's farmers cope with the situation.
At the request of MDA, MoDOT is waiving the fee for blanket permits to haul wide loads of hay. The fee will be waived statewide through December 31 on loads up to 12 feet, four inches wide that are of legal height, length and weight.
In addition to this savings of more than $60, the waiver will allow hay movements to take place over holidays and at night, a practice normally not allowed. Drivers are usually required to use a reflective, oversized load sign and clearance lights instead of flags at the edges of their loads when hauling at night or when visibility is less than 500 feet. When utilizing the provision for hauling at night, keep in mind that many Missouri highways are narrow, hilly and winding. Keep safety in mind when hauling at night. Use slow moving vehicle emblems, lighting, and possibly flag vehicles to reduce the chance for accidents.
(Author: Don Day, Natural Resource Engineer, Source, MoDOT News Release)
Ag Connection - Ag Connection Newsletter, September 2006
http://outreach.missouri.edu/agconnection/newsletters/is-06-09.htm -- Revised: September 06, 2006