Sugarhouse considered single-purpose agricultural structure?

[Snowy Pass Maple]

I would guess that a sugarhouse meets this definition - but figured I'd check to see what the standard treatment is. Couldn't find this online.

If I understand things correctly, that classification would make it eligible for either section 179 or bonus depreciation - the bonus depreciation option having the advantage of allowing a net operating loss, even against off-farm income, while getting started; section 179 can only deduct income but not allow a loss.

Wondering what others have done on this - haven't seen bonus depreciation mentioned once in the archive, but it seems to have tremendous applicability to maple as it would also apply to any new equipment purchases as well.

[cncaboose]

For income tax purposes I wrote off the expenses for all of the sugar house components (lumber, roofing, concrete, etc) when I built it in '06. No complaints from the IRS even though I had not made a gallon of syrup yet. For property tax purposes the sugar house qualifies as a new ag structure, if you are operating as a "farm", and is tax exempt in NY for 10 years. You have to fill out some paperwork for your town assessor to qualify and it only works if your operation qualifies for ag assessment in the first place.

[SWEETER CREATIONS]

Where do you get the regulations for ag assessment? What are the requirements ?

[cncaboose]

Try This: http://www.tax.ny.gov/research/property/assess/valuation/ag_overview.htm I believe that your operation has to generate $10000 worth of ag gross products. We meet it because we have 17 acres of corn field leased out to a local farmer which yields way over $10000 worth of grain every year.
I love your sugar house.

[SWEETER CREATIONS]

Ian thank you for the compliment you are comming to the tree tapping this weekend aren't you ? 11:00 am then coffee and doughnuts with maple cream at the sugar house . Be glad to have you and the family come. If you didn't get an invitation I apologize some of them came back with wrong addresses on them.
Mike

[Snowy Pass Maple]

For income tax purposes I wrote off the expenses for all of the sugar house components (lumber, roofing, concrete, etc) when I built it in '06. No complaints from the IRS even though I had not made a gallon of syrup yet. For property tax purposes the sugar house qualifies as a new ag structure, if you are operating as a "farm", and is tax exempt in NY for 10 years. You have to fill out some paperwork for your town assessor to qualify and it only works if your operation qualifies for ag assessment in the first place.

You didn't depreciate the structure at all? Seems like you have to either take section 179 or some type of depreciation as it's a capital improvement.

Unfortunately, we're not at the $10K threshold yet... although I thought I read one of the maple bills would give prop. tax exemption for all maple buildings, even if not on a $10K farm. May be hard to do with the day job!

[vtmapleman]

Folks, a building does not qualify for section 179. Also you cannot legally deduction the materials going into the buidling of a sugarhouse as individual items - they must be capitalized and depreciated over the life of the building - the depricable life is within the regulations. The IRS will not immediately question your returns - they may take a couple of years if ever - one of the flags is having continue losses over a period of a couple of years. The worst thing to get is a letter from the IRS - at that time the few dollars you think you saved in taxes is not worth it it...

[Snowy Pass Maple]

Folks, a building does not qualify for section 179. Also you cannot legally deduction the materials going into the buidling of a sugarhouse as individual items - they must be capitalized and depreciated over the life of the building - the depricable life is within the regulations. The IRS will not immediately question your returns - they may take a couple of years if ever - one of the flags is having continue losses over a period of a couple of years. The worst thing to get is a letter from the IRS - at that time the few dollars you think you saved in taxes is not worth it it...

I agree that it can take time for an error to come to light... maybe at 7 years, the case above may get by. In general, I would think expensing building materials would be a problem if the return was examined. That being said, if they allowed bonus depreciation in 2006 (not sure on that) maybe you could amend the return to use that instead and help minimize the bite if the IRS said it was not a valid expense deduction and forced you to amend the return?

The reason for my question is based on following excerpt from IRS publication 225. Key question is whether a maple sugarhouse considered a single-purpose agricultural structure - and if so, what level of functionality would disqualify it as such? I know if you sell out of it, the answer is no - then it's also a retail location and would not qualify. The other subtle detail may be whether you only boil, or boil and bottle, etc. Despite trying pretty hard on google, I was unable to get a clear answer on this and figured some of you guys must have been through this.

I believe that the bonus depreciation definitions are wider and also allow "multi-purpose" farm buildings. This allows you an immediate deduction of 50% of the building (was 100% in some prior years) and can also be taken as a net operating loss, even against non-farm income, which you cannot do with Sec 179. I'm just wondering if Sec 179 is also an option - not sure yet which way I would go if both were available.

http://www.irs.gov/publications/p225/ch07.html

Eligible Property

To qualify for the section 179 expense deduction, your property must be one of the following types of depreciable property.

Tangible personal property.

Other tangible property (except buildings and their structural components) used as:

An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services;

A research facility used in connection with any of the activities in (a) above; or

A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities.

Single purpose agricultural (livestock) or horticultural structures.

Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum.

Off-the-shelf computer software that is readily available for purchase by the general public, is subject to a nonexclusive lease, and has not been substantially modified.