However, the Small Business Jobs Act of 2010 removed cell phones from the definition of listed property (listed property items require a log of use, etc.).  This new law is effective January 1, 2010 and the IRS just issued Notice 2011-72 clarifying how these changes apply to taxpayers.  In brief, as long as the cell phone is necessary for the employee to perform their work for the employer, then the cell phone cost is deductible by the employer and is non-taxable to the employee.  This applies whether the employer pays for the cell phone service directly or reimburses the employee.

I would hazard a guess that almost no farmers or other users of cell phones ever performed the logging of cell phone use in any substantial manner, so this new rule is very welcome.

If you want to get even more detail on this matter, here is a memo that the IRS has issued that provides guidance to their agents in reviewing cash allowances and reimbursements for work-related use of personally-owned cell phones.

“Does Iowa have a reduced capital gains tax rate on sale of farm land held for 15 years?”

If certain qualifications are met such as holding the farmland or assets for at least 10 years and material participation in the farm (can not cash rent the land), Iowa does have an exclusion of 100% of the capital when selling your farmland or other farm assets.  This also applies to other business related assets, not just farmland.

I also know that Oregon had a capital gains exclusion for the sale of farmland, although that may no longer be there.

The key when analyzing your total capital gains tax is to review your state requirements to determine if there is a qualified deduction for the sale of farm assets.  Many states have these exclusions, but there are almost always different rules for each state.

• Last year, I remember having multiple stops where the corn yield was over 200 bushels.  Also, I remember that at least 70% or more of the corn yields were 170 or higher.  This year, each day, we would only have one or two fields over 200 and perhaps 3 other fields in the 170 range.  All of the other fields were less than 150 each day.  However, last year, our lowest yields were substantially lower than this year.  We never had a yield under 100 bushels this year and last year, I remember having several under 100, primarily in South Dakota and North Central Nebraska.  This year, we did not cover any of that area.
• The soybeans on average looked very good this year, however, the heat and lack of rain may be getting to them.  If the beans get a couple of inches of rain in the next couple of weeks, they should yield fairly well.
• At all four of the evening stops, the farmers in attendance were not a bullish about their yields as last year.  At the same time last year, all of the crops looked very good, however, the finish to the crop was poor.  This year, most farmers expect a poor finish, but hope for better.
• There were more people on this year’s tour and more of them were not farmers.  It appears that the tour is one of the best guides for industry groups such as traders, hedge funds, farm media groups, etc. to get a good handle on where the crop is headed.
• Pro Farmer does an excellent job of putting on the tour.  From Chip and Brian leading each leg to the other staff involved in making each day and night run smoothly, I just want to reinforce how good of a job they do.

All in all, this year’s Midwest crop tour shows a lower crop than last year or the three year trend and I look forward to next year to see how it turns out.

Now, with most agents being able to utilize these accounting software packages on their computers, they are demanding a backup of the whole accounting software, even if there are years in the accounting software that are not under exam.  Also, any comments in the comments, memo or notes section of your software would be available for review by the IRS.

This case decision is limited to this small district court jurisdiction, but you can be sure that the IRS will be very aggressive in taking this to the next level.

Just be careful what you write in your accounting software comments section.  Remember, an IRS agent may be reading it in the future.

• Corn was primarily used for feed
• Wheat was more heavily used for bread and other products directly consumed as food
• A bushel of wheat also provides slightly greater feed value than a bushel of corn

However, during many days in 2011, corn has now overtaken wheat in price.  This has been caused by these major factors:

• The Ethanol mandate requires almost 5 billion bushels of corn to be used
• China has rapidly increased their imports of corn
• Wheat is in plentiful supply and corn may have its lowest carryover in many years

In a recent Wall Street Journal article, it mentioned that due to this flip-flop in prices, many consumers of corn for feed such as poultry and hog producers are now blending in more wheat into their feed rations.  Also, wheat can be used to make Ethanol and some Ethanol producers are now blending about 5% wheat into their mix. 

As long as wheat remains cheaper than corn, this trend may continue.

We continued onto toward Mankato and again the corn and beans looked to be in very good shape.  Although it is hard to note heat stress from the highway.  Also, smelled lots of money along the road, i.e. hog confinement facilities were everywhere.

At Lake Washington, a good size lake near Mankato, we stopped for lunch.  It was very nice out on the deck eating lunch and recovering from sitting on the motorcycle.  After lunch, we wandered up toward St. Peter, which at one point was either the state capital of Minnesota or had plans to be the state capital.  After there, we made a beeline back to New Ulm.

All in all, a very rewarding a relaxing way to check out the farm country in Southern Minnesota.

Also, in driving from Sioux Falls to Omaha on Sunday, I noted the heavy flood damage in the Sioux City area.  There appeared to be a fairly new Hilton Garden Inn that had become a island all to itself.  Sand bags were placed all around it and the river was right up to the bags.  Many parts of the city appeared to completely covered in water.

I crossed over on Highway 30 near Blair, Nebraska and on both sides of the road for about two miles was completely underwater.  The Missouri was extremely high there, but it looked like it had started to recede a little.

I visited with my Uncle and Aunt at their house on Thursday and spoke with my cousin.  Usually wheat harvest would start around the 15th of July (some years around the 4th even) but this year, they will be starting their first field for harvest sometime next week.  This is by far that latest harvest that I can remember for this area.

The good news is that the average yield should be on the high end, but a lot of wheat is down on the ground and it will be harder to harvest.  One of my least favorite things growing up on the farm was harvesting downed wheat.  Usually this wheat would have high yields unless it went down too soon, then it would not finish filling out.

I will be driving combine around the 10th of August and will let you know how the fields look.

My wife and I spent the night in Lewiston and then headed down to Enterprise and Joseph, Oregon which has some of the prettiest scenery in America.  This area is called the Alps of America and if you ever get out this way, you need to check it out.  I noticed several combines harvesting grass seed over in the LaGrande area and based upon the straw I saw, the yields look good there, but you never know for sure with straw.

Then as we got closer to home along the Columbia River, the onion harvest was in full swing and when you are on a motorcycle, you can really smell that harvest.

Due to the increase in input costs, operating loan levels have increased dramatically from the second quarter of 2010, up nearly 36%.  The number of livestock loans dropped slightly from the year before, however, the average loan amount almost doubled, pushing the volume of livestock loans more than 25% higher.

Capital spending on the farm for machinery and equipment seems to have cooled during this quarter.  Loan volumes for farm machinery and equipment plunged from a first quarter spike and were 36% below the year-ago levels.  I have a feeling that the 50%/100% bonus depreciation enacted late last year has soaked up a lot of the demand for new equipment and these types of sales may remain low until year-end.

The average borrowing rate on operating loans fell from 5.3% to 4.7%, however, the rate for equipment loans did incur a slight uptick to almost 5.4%.

• Normal retirement age (for most of us this will be somewhere between age 66 and 67),
• Age 70, and
• Age 62

The calculator takes into account your current age, last year’s income.  You can also tell it how much you think you will earn each year until retirement and what age you are planning on retiring at and it will calculate the monthly benefit.

This is a nice feature to have and now you do not have to wait for the annual letter to show up from Social Security letting you know what your benefits might be.  However, you should review that letter each year to verify that Social Security has the right amount of earnings listed.  I have seen several mistakes on these letters.

As long as the mandate remains in place to produce a certain number of gallons of ethanol each year, the eliminate of the blenders credit will most likely have little or no effect on the price of corn.  The credit is simply an additional way of transferring additional revenue to the refineries and does not go directly to any corn grower.  It may affect the price the refinery is willing to pay a little bit, but with the mandate in place, they still have to purchase the ethanol.

It will be interesting to see how this finally turns out.