Page 14 - MWC 10-5-2023s

FACTORS AFFECTING The Midwest Cattleman · October 5, 2023 · P14
continued from page 6
erage dress- WILL YOU CAPITALIZE
ing cows for continued from page 13
high and low $89,251 - $553,850. Also, time to exit the business.
dressing cows. there is no self-employment So, what is the point? A
Producers can tax on capital gains income conversation with your tax
often impact which is 15.3% on ordinary accountant may be warrant-
the value of income. The tax rate on or- ed as marketing strategies
cull cows by dinary income is 10% up to and plans for this fall and
managing the $22,000, 12% for income from winter as well as the next
weight and $22,000 to $89,450 and 22% few years are evaluated.
condition of for income from $89,450 to Examining opportunities to
cows before $190,750. These tax rates take advantage of high cow
marketing. are reduced by 20% if the in- prices by selling more bred
Cull cows have the most agement considerations and come qualifies for the “Qual- cows and simultaneously re-
pronounced seasonal price the availability of surplus ified Business Income De- taining more heifers could
pattern of any class of cattle feed. duction.” Visit with your tax reveal ways to take advan-
ranging from highs in June Going forward, many culled accountant for more informa- tage of the capital gains tax
and July to lows in Novem- cows will likely be screened tion on this. rate which allow for more of
ber and December (Figure for the possibility of produc- For $150,000 of taxable the money generated from
1). Cull cows that are thin ing another calf and selling net income after deductions cattle sales to be kept in the
(Lean, low dressing) in the later for slaughter value. from ordinary cattle sales, a producer’s pocket. Selling
fall and are retained and fed Leaving the cull cows with ranching couple treated as home-raised bred cows that
until spring may sell as Boner a bull while adding weight a sole proprietorship would may be approaching their
cows at average dressing by after weaning may produce owe approximately $38,000 cyclical peak in market price
March with an increase in another increment of added in federal taxes and self-em- and having that income taxed
value of $400-$600/head due value if she can be sold as a ployment tax. If the taxable at a capital gains rate rath-
to added weight, grade, and bred cow next spring at sea- net income were from capital er than as ordinary income
condition. Of course, the fea- sonally high bred cow prices. gain sales, the couple would could be a significant wealth
sibility of holding cull cows owe approximately $9,000 in building advantage! Selling
depends on time and man- taxes. This is a difference of home raised bred cows when
$29,000! If you are a cow-calf prices are high and replacing
producer and are thinking of them with home raised heif-
retiring, present high bred er calves could be profitable
cow prices, capital gains tax in the near term for the cow-
rates and current tax laws calf business.
may make this an attractive

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