| ||||||||||
 
Dr. Ronald P. Rogers CHIROPRACTOR Support for your body's natural healing capabilities 270-384-5554 Click here for details 
  
Columbia Gas Dept. GAS LEAK or GAS SMELL Contact Numbers 24 hrs/ 365 days 270-384-2006 or 9-1-1 Call before you dig 
Visit ColumbiaMagazine's Directory of Churches Addresses, times, phone numbers and more for churches in Adair County Find Great Stuff in ColumbiaMagazine's Classified Ads Antiques, Help Wanted, Autos, Real Estate, Legal Notices, More... 
|
Adair Co. Extension Agent Report: Tobacco buyout tax planning By David Herbst Adair County Extension Agent for Agriculture Columbia, KY. August 2, 2005. Most farmers across the state should start seeing the first of 10 annual checks roll in from the sale of their tobacco allotment. Farmers were given the opportunity to sell (or otherwise lose) their tobacco allotment earlier this year. The payout provides for an immediate payment due out this month. The remaining payments will be paid in 9 equal installments over the next 9 years, beginning in January of next year. Farmers can defer the payment of some of the taxes on their buyout through the use of what is commonly called a 1031 Like-kind Exchange. The payout to the farmers comes in two parts. The tobacco owner of the quota receives $7/lb of tobacco while the tobacco grower receives $3/lb. Farmers that grow their own quota receive the full $10/lb payout. For tax purposes, the $7 payment is treated differently than the $3 payment. The $7 payment is treated as a capital asset, which allows the payment to qualify for capital gain treatment and for 1031 Exchange treatment. The $3 payment will be treated as ordinary income. Initially, it looked like it was going to be close to impossible for the farmers to meet the complex requirements of the 1031 Exchange. With a new IRS ruling issued on July 18th, however, the IRS significantly relaxed these very stringent rules related to the buyouts and 1031 Exchanges. Farmers now have up to September 16th of this year to make a decision about whether to participate in a 1031 Exchange. If the farmer successfully completes the 1031 Exchange, the farmer will not pay tax on the $7 portion of the tobacco buyout. In order to meet one of the 1031 requirements, the farmer must receive a lump-sum amount for the 9 payments. Farmers should be able to receive between 75-80% of their total payout from a financial institution. Another requirement of the 1031 Exchange is that the lump-sum payment must be paid directly to a Third Party Intermediary (TPI). The farmer cannot receive the lump-sum payment directly. The farmer can locate a qualified TPI by talking with someone at their financial institution. The 1031 Exchange also requires that the farmer must use the lump-sum payment toward the purchase of real estate. The lump-sum payment must come out of the TPIs escrow directly to the seller of a parcel of real estate. The real estate being purchased can be any type of real estate as long as it is held for investment and not for personal use. Examples include farms, apartments, single-family rental homes, and commercial property. The IRS also requires that the farmers first payment that he is just receiving must go into the escrow held by the TPI. The payment must go into the TPIs escrow within 5 days of entering into an exchange agreement with the TPI and the financial institution. If the exchange agreement is entered into on the last day the IRS allows (September 16th), then the farmer has until September 21st to make the deposit of the first payment into the TPIs escrow. Once the farmer enters into the exchange agreement with the TPI and a Form CCC-962 (available at Farm Service Agency office) with the financial institution, he has 45 days from September 16th to identify the property or properties he is going to purchase with the funds held in the TPIs escrow. The TPI escrow amount can be used as a full payment toward the real estate purchase or as a down payment toward a financed parcel or parcels. Consequently, if a farmer has $50,000 in the TPI escrow, he can purchase a $150,000 property using the $50,000 as a down payment and secure the remaining $100,000 from other sources. Another important requirement is the 180-day date. Within 180 days of the date of the exchange agreement, the farmer must close on the purchase of the real estate being purchased. So starting on September 16th, the farmer has 45 days to identify the property and 180 days to close. While the 1031 Exchange remains a fairly complex planning opportunity, it still provides the farmer an excellent alternative to paying taxes on the growers portion of the tobacco buyout proceeds. If you have questions about the opportunities with the Tobacco Buyout please contact me at the Adair County Cooperative Extension Service office by calling 384-2317; or visit the office located at 409 Fairground St., in Columbia.Educational programs of the Cooperative Extension Service serve all people regardless of race, color, age, sex, religion, disability, or national origin. This story was posted on 2005-08-02 18:37:41
Printable: this page is now automatically formatted for printing.
Have comments or corrections for this story? Use our contact form and let us know. More articles from topic News:
Look Whos Happy Now Over 130 slogan ideas submitted for new promotional logo Annual 450-mile 127 Yard Sale begins Thursday, August 4 Get Moving Kentucky ends with banquet to honor those who met their goals YOU GUESSED IT: mystery baby Garner An all too frequent problem: Phones out AGAIN in Bliss, Gradyville area State Champions: 11-year-old Adair girls All Star Softball Team A NEW CHELF FAMILY CONNECTION: Lucy Katherine Devenney Twenty kids at S.A.'s Paradise Valley Camp on Dale Hollow Lake Free workforce development informational meeting offered at Lindsey View even more articles in topic News |
 
115 Jamestown St. Columbia, KY. 270-384-2496 
  
   
 Provided by the Adair Co Fiscal Court and the Adair Co. Emergency Mgt. Agency 
|
||||||||
|
| ||||||||||
|
Quick Links to Popular Features
Looking for a story or picture? Try our Photo Archive or our Stories Archive for all the information that's appeared on ColumbiaMagazine.com. | ||||||||||
|
Contact us: Columbia Magazine and columbiamagazine.com are published by Linda Waggener and Pen Waggener, PO Box 906, Columbia, KY 42728. Please use our contact page, or send questions about technical issues with this site to webmaster@columbiamagazine.com. All logos and trademarks used on this site are property of their respective owners. All comments remain the property and responsibility of their posters, all articles and photos remain the property of their creators, and all the rest is copyright 1995-Present by Columbia Magazine. Privacy policy: use of this site requires no sharing of information. Voluntarily shared information may be published and made available to the public on this site and/or stored electronically. Anonymous submissions will be subject to additional verification. Cookies are not required to use our site. However, if you have cookies enabled in your web browser, some of our advertisers may use cookies for interest-based advertising across multiple domains. For more information about third-party advertising, visit the NAI web privacy site.
| ||||||||||
