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The Farm CPA

RSS By: Paul Neiffer, Top Producer

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

New New - Not New to You!

Jan 21, 2011

We had a reader ask the following question:

"I'm thinking of purchasing a farm acreage with 3 newer farm equipment buildings and some old grain storage buildings. Could I take advantage 100% depreciation since they are new buildings to me and will be used for my farm in 2011?"


On the bonus depreciation rules for farm equipment and buildings, the rule is that the property must be new as in the first time that this property is put into use.  For example, when a farmer buys a new tractor, if it came directly from the dealer and had not been used in production ever before, then this is new property that qualifies for the 100% bonus depreciation.  However, if the farmer bought a "new" combine from the dealership that had been used for 20 hours by another farmer before being traded in, this is not new equipment.  Even though it is new to the farmer, it is not new to farming (since it had been used previously).

In the case of the question, even if the farm buildings were only two months old, since they were in use by the previous owner, they will not qualify for the bonus depreciation. 

One rule of thumb is that anytime you purchase farmland from another party, it is VERY unlikely that any of the property purchased will qualify for bonus depreciation.  Some will qualify for the Section 179 deduction, but none of it should qualify for 100% bonus depreciation.  As in all cases, you would need to review this with your tax advisor.

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