Tax Benefits of
Owning Alpacas (1)
An attractive advantage to raising
alpacas is the very generous tax benefits. Along with potential
profits from the sale of fleece and offspring, if alpacas are actively
raised for profit, all the expenses of the business can be written off
against your income.
Expenses would include feed, fertilizer, veterinarian care, etc., and
depreciation of tangible property such as breeding stock, barns and
fences. These expenses can also help shelter current cash flow from
off farm income from tax. Improvements to facilities are not
only deductible expenses, but increase the real value of your
property.
A small farmer or land owner can purchase several alpacas and allow
the herd to grow over time without paying income tax on its increased
size and value. In contrast, for an investment in a CD, interest
earned during the year would be taxable. In addition, the CD could not
be depreciated. Raising alpacas may also qualify your land for
agricultural property tax deferral.
Ownership
Approaches
The less active owner using an agisted (boarding at a host farm)
ownership approach may not enjoy all of these tax benefits, but many
of the advantages apply. For instance, the passive alpaca owner can
depreciate his breeding stock and expense the direct cost of
maintaining the animals.
The main difference between a hands-on or active farmer and a passive
owner involves the passive owner's ability to deduct his investment
losses against his other income. The passive investor may only be able
to deduct losses from his investment against gain from the sale of
animals and fleece. The active farmer can take the losses against his
other income.
Consult your accountant or tax advisor for more details. The IRS
publication (#225,
entitled The Farmers Tax Guide) can also be obtained from your
local IRS office (or click on the link for the 2001 version), and is a
very helpful resource.
(1)
Excerpted from the Alpaca Owners and Breeders Association investment
brochure. For more information go to our " links"
page and click on "AOBA".
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