Tag Archives: taxes
Adding Up Farmland Value Factors
http://www.agricultu….jpg&type=admin Jeff Caldwell 09/17/2013 Death and taxes. The old saying is those are the only two certainties in this world. And right now, that’s especially true for the farmland market. There’s not as much land going onto the market for sale right now — for a few reasons — and that calls for anybody looking to add acres to their farm to always be ready to pull the trigger, says one farmland market expert. The proposition of buying or selling land, especially the latter, is typically an emotional one, and as such doesn’t always follow market fundamentals and dynamics in lockstep. So, in lieu of a textbook for how to approach buying land when considering these factors, it’s important to always be ready when the time arises that circumstances dictate a seller to pull the trigger, says Randy Hertz, accredited farm manager and land consultant with Hertz Farm Management, Inc. “Certainly, you need to be in buying position. As people get panicky, they may be willing to take a lower price or offer lower than the general public really would anticipate. It’s an emotional decision,” he says. That emotion is typically manifested directly in how buyers approach potential land buys from sellers who, whether it’s the settlement of an estate by multiple stakeholders or a retirement, may be facing just as emotional a set of circumstances themselves. Combine that with the fact that buying land is a long-term decision, and it can make it tough to forecast how any given land sale will shake out. Then, add on to that variables specific to years like 2013, namely whether the land was planted or laid idle because of adverse weather, and sale prices are tough to peg. All this adds to the importance of staying in that buying position, Hertz says. “As the markets go against you, it’s an angst. As prices go up, you feel good about things. There’s a lot of prevented-planting acres this year. In those areas, it certainly was negatively impacted by the emotions of struggling crops,” he says, adding that a recent Iowa land sale netted a lower-than-expected price because it hadn’t been planted in the spring because of the weather. “People get bullish at the top. People overstay the market. Farmers are notorious for this. They ride it up, ride it down, and right at the bottom, freak out and sell in the bottom third of the market. “It’s such an imperfect market,” he adds. Right now, a major factor playing into both the amount of land going up for sale and the price volatility those sales yield is the state of the economy, both on the macro level and in the ag sector. In the former, taxes and return on investment are huge factors. Farmland remains a solid investment compared to equities, and with the tax implications of selling land as they are right now, it makes it easy to hold on, even if the climb in land values is seen tapering off. “There are just fewer farms on the market now. The reason for that is when you’ve got a land market that increases in value, people don’t want to pay taxes on that increase. And, you’ve got low interest rates. They say ‘I’m earning 3% to 3 1/2% on rented land. What would I do if I sold? I’d have to pay tax on $9,000/acre in capital gains,” Hertz says. “You’re going to pay one-third of that in taxes, plus the privilege of 1% on a CD. So, you’ve seen a lot fewer farms for sale. Ones selling are ones stepping up in basis, estates or families fighting.” More specific to the ag sector, crop inputs and cash land rents will continue to drive where sale prices wind up moving forward. The former group influences the direction of the latter, and how close rents have kept up with the general fluctuation of land values will help determine the willingness of landowners on the fence to sell land. “The dynamics of the farm market, specifically inputs have rocketed. Cash rents have not kept pace with the profits farmers have gotten. People are wondering what will happen with cash rents,” Hertz says. “If you had not increased along with where it should’ve been, you probably should’ve gotten an increase. If you were pretty good but not at top of the market, rent will probably be pretty good next year. If you were at the high for cash rent last year, probably adjust downward.” Specific to the last few years in the heart of the Corn Belt, the shape of the current crop on top of how sharply the land market’s fluctuated in the last five years will likely contribute to how it flexes and moves in the future, Hertz says. That’s clear when comparing past moves in key states in the region. “Illinois and Indiana are really strong right now. They’ve got a good crop coming, and they have been somewhat toned-down in their increases. Certainly not as fast as the increases Iowa has seen,” he says. “You’re going to see some adjustments like that.” And while he fully expects the general rise in farmland values to taper off in the coming year, Hertz says current strong grain prices will likely keep the market out of the red, even if this year’s crops don’t amount to earlier expectations. “How could you ever look a gift horse in the mouth? We can sell new-crop soybeans for over $13/bushel cash. Those are phenomenal prices. Yes, we’re going to get kicked in the shorts with our soybean yield, but you still have to sell the stuff,” he adds. “You’ve still got to make a decision.” Continue reading
EU Vote Bursts Bubble On Biofuel Future
DARAGH MCCULLOUGH – 29 AUGUST 2013 A recent vote by EU politicians makes the future of the nascent biofuel sector here even more precarious than it already was. A decade ago we were told that the world had entered a new post-peak oil era. With dwindling supplies, countries needed to take action to secure new sustainable sources of energy. Ireland was as good a case for bioenergy as anywhere, spending €6bn annually on imported energy. Everybody wanted a slice of that action. So ambitious targets obliging us to have 20pc of our total energy requirements coming from renewable sources by 2020 were signed into law. The Government pumped millions into schemes to incentivise farmers to grow new biomass crops such as elephant grass and put up oil-pressing plants. To the delight of the sceptics, much of this endeavour appears to be unravelling at the seams. Yes, wind-farms continue to be constructed and solar-panels adorn more and more roof-tops. But hundreds of acres of elephant grass, or ‘miscanthus’ to give it its proper name, have already been ploughed in by disillusioned farmers. The more enterprising individuals that invested millions in briquetting and oil-pressing plants have lost their shirts on the enterprises as market reality kicked in. Fossil fuels are becoming more expensive, but we are becoming more efficient at using them and extracting them. The actual end-game in terms of supplies is still so far off that the market still doesn’t price it into the equation. Irish farmers discovered to their cost that the rest of the planet is also able to generate masses of biomass – and ship it in here at a fraction of the cost that the Irish farmer needs to make a profit. Waste by-products such as palm kernals and cocoa shells are available for virtually nothing. The countries that produce these often can’t produce beef or milk at the same cost that we can in Ireland. Farmers and policymakers momentarily lost sight of what they had – a real competitive advantage in producing. At the same time, policymakers are still confused as to whether growing crops to fuel our cars actually makes sense. As a result, after their initial wave of enthusiasm, European politicians are slowing coming around to the idea that promoting the production of biomass and biofuels may not be the best use of our taxes. “Biofuels increase the demand for crops, which can encourage, at a global level, putting land into production, land that might not otherwise be used. And greater demand can lead to higher prices for food, hitting the poor hardest,” said Ireland East MEP Mairead McGuinness . As a result the EU recently voted to cap the amount of biofuel that can come from food sources at 5.5pc. But experts in Teagasc still believe that there is a future in the sector for those willing to take the risk. “We had to start somewhere in our search for alternatives to fossil fuels,” said renewable energy specialist Barry Caslin. “Growing miscanthus and oilseed rape crops to simply burn for heat is first generation stuff. Algae, waste digesters and enzymes are part of the second generation, and at some point we will be growing fuel in sustainable ways that is competitive with fossil fuels,” he said. In the meantime, Mr Caslin believes that Ireland is losing out on investment, jobs and economic growth if the Government doesn’t continue to support the advancement of the sector. It’s a classic case of the chicken and egg. Should we continue subsidising the development of renewable energy sources or should we wait until the market can support the development of the sector itself? Time will tell. Irish Independent Continue reading
The Top Tax Havens
Tina Samuels shares the top tax havens across the globe 5 AUG 2013 By: Tina Samuels A tax haven is a location that offers taxes breaks or lower taxes in that area. It can either be a state, territory or country, with most being offshore locations, but a few in the United States as well. There are many benefits to putting your money in a bank located in a tax haven, which investors and corporations have done repeatedly. In the past, they were somewhat of a mystery, where corporations wanted to keep it unknown so the government wouldn’t be aware of it. However in recent years, the exact locations of tax havens, like the Cayman Islands, Nevada and Monaco, have been very well known. There are even major corporations in tax havens, such as Apple, Microsoft, Bank of America, Cisco and many more. OECD Rules for Tax Havens The Organization for Economic Co-operation and Development (OECD) is in charge of defining tax havens. They base their distinctions on three main factors: the amount of taxes, protecting financial information and not having transparency. The Amount of Taxes This factor is for countries or states that either don’t have taxes or very minimal taxes, also known as nominal taxes. It often includes lack of personal income, gift, inheritance or capital gains taxes. Protecting Financial Information The location must also offer protection of the investor’s personal financial information, to be identified as a tax haven. They will have some sort of practice or law that keeps their financial information safe, not be shared with outside governments or authorities . No Transparency The final factor for tax havens is to have a lack of transparency. This is transparency in legal, administrative or legislative provisions. The OECD wants to be sure the nation has laws that are applied consistently for everyone and that foreign tax authorities have no say in the matter. Here is a list of the top 10 tax havens in the world, according to Daily Intel. Each of them has their own benefits and drawbacks. Switzerland Switzerland is one of the most well known tax havens in the world, known as a “neutral” country. But since they are known for their tax haven status, they are also a bigger target. Austria Although Austria signed an agreement in 2009 to get removed from the Organization for Economic Co-operation and Development’s list resulting in sharing banking information, they still have a place on the list. Austria doesn’t have inheritance tax, and they provide tax breaks for citizens. Singapore Singapore is rising quickly in popularity as a tax haven, even drawing the attention of co-founder of Facebook, Eduardo Saverin. There is no capital gains tax in Singapore, which is one of the reasons it has become such a popular location. British Virgin Islands The British Virgin Islands have no inheritance tax, capital gains tax, sales tax or gift tax, making them one of the most popular tax havens. Unfortunately this also means the government is aware of their existence, putting investors at risk. Monaco Monaco has strict laws in relation to tax evasion, but if you can connect with a bank there, you have multiple perks. Any investor wanting to avoid tax and get into a tax haven will find benefits to choosing Monaco. Cayman Islands Hedge funders are particularly fond of putting their money in the Cayman Island, which is why the name is used so often in movies and television shows. Celebrities, investors and even politicians like Mitt Romney choose the Cayman Islands as their go-to tax haven. United States Not all tax havens are located outside the U.S., in fact two states have tax havens in the U.S.: Delaware and Nevada. Delaware is the local corporate tax haven and hold more than 50 percent of corporation funds in the U.S. that are incorporated in Delaware. Companies like Bank of America and apple that have addresses in Delaware, take full advantage. In Nevada, there are no personal income taxes and is another great place in the U.S. for tax breaks. Tax havens are a safe alternative to paying high taxes in the U.S., U.K. or other countries where they are known for their rising taxes and strict regulations. It is something for investors, individuals, and corporations to explore. Continue reading
