It is now apparent when I wrote my post last week on electing out of deferred sales contracts, that my terminology was not the best. Sometimes when writing these posts, I know what I mean but when transmitting the brain waves to the keyboard, it does not always get put down correctly.
The correction on the post is that a deferred sales contract calls for the delivery and sale of the grain in 2011, however, the payment of the grains sales delivered in 2011 will be deferred til 2012. If your grain sales contract meets this criteria, then you would normally report the grain sales in 2012 since that is when you collected the funds (assuming a cash basis farmer).
However, you may elect out of this installment sale on a contract by contract basis and report the income in 2011 if you so choose.
I am sorry for the confusion.
Categories: Farm Industry Trends, Farm Operations, Farm Taxes
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February 9th, 2012 at 5:24 am
Thanks for the timely notice of the deferred grain sale comment. We were able to use a 100% bonus depreciation deduction on a new building for 2011 by bringing in a grain sale that was delivered and sold in 2011 but issued the check for in early January. Knowing this bonus depreciation is “all or nothing” and with the alternative of a 20 year life, we greatly benefited from this technique.
February 9th, 2012 at 5:45 am
I am glad that we could help you on this.
The bonus depreciation rules usually help farmers but sometimes it is too good of a help.