Varley Law Office

2012-01-29T17:43:00.000-08:00

Warren A. Varley
•Attorney-at-Law•
201 NE Second Street
P. O. Box 235

Stuart, Iowa 50250-0235

Unencryted e-mail messages are not confidential or secure. Please do not send any message you consider to be confidential or sensitive in nature.

Please know that the act of sending electronic mail to our firm will not create an attorney-client relationship. Unless you are already a client of our firm, any electronic communication will not be privileged, & may be disclosed.

Tax Time 2012

2012-01-21T13:20:00.000-08:00

It is time again to be thinking of income taxes. IRS in its continuing effort to close the tax gap (the gap between income tax paid and the income tax that ought to be paid, estimated to be over $300 billion) is requiring increased documentation on capital gains (and a new Form 8949) and stepping up audits on capital gains. Congress has also stiffened reporting requirements and penalties on foreign held assets. Because the penalties are so high ($10,000 minimum for inadvertent misreporting; $100,000 or half the balance of the account, whichever is greater, for intentional misreporting), I cannot prepare your tax return if you hold any assets outside of the United States. On the positive side, conversions from traditional retirement plans to Roth IRAs are no longer limited by income and taxpayers with gross income less than $57,000 and access to the internet are eligible for free tax preparation and filing. IRS requires mileage logs for vehicles with business use; standard mileage rates for 2011: Jan 1 to June 30 July 1 to Dec 31 IowaBusiness: 51¢/mi. 55.5¢/mi. “Medical & moving: 19¢/mi. 23.5¢/mi. “Charitable 14¢/mi. 14¢/mi. 39¢/mi. You are required to send a Form 1099 to any individual, partnership or LLC that you paid $600.00 or more for services, rent or interest. Payments to cooperatives, banks and other corporate entities are excluded. Wages in excess of $150 in any quarter require the filing of Forms W-2 and W-3. If you would like us to prepare these forms, you will need to provide us with the information before January 27, 2012. If you have questions on any of the above or other tax matters feel free to call, e-mail, or stop in. When you have your records ready you may let us know and we will set up an appointment that is convenient for you. Evening or Saturday appointments can be arranged. Pursuant to U.S. Treasury Regulations, you are hereby advised that any federal tax advice included in this communication is not intended or written to be used, and cannot be used, to avoid any U.S. federal tax penalties or to promote, market, or recommend to another party any transaction or matter. For further information, see IRS Circular 230.

Varley Law Office

2011-10-17T10:01:00.000-07:00

Warren A. Varley
•Attorney-at-Law•
201 NE Second Street
P. O. Box 235

Stuart, Iowa 50250-0235

varleylaw@gmail.com

Unencryted e-mail messages are not confidential or secure. Please do not send any message you consider to be confidential or sensitive in nature.

Liz Mathis for Iowa Senate

2011-10-01T09:10:00.000-07:00

Those of you who favor progressive economic development in Iowa should consider supporting Liz Mathis in her bid to fill the vacant Iowa Senate seat in the Marion/Robins/Hiawatha area.* Her webpage is http://www.mathis4statesenate.com/

* Thank you for the correction IowaWineGuy!

2011 Farm Cash Rent Update

2011-08-14T08:40:00.000-07:00

© _ _ _ Now is the time dictated by Iowa law to begin negotiating crop land leases for 2012 or at least notify your tenant/landlord, as the case may be, if you wish to change any of the terms in your current leas. (Remember that mutual consent is required if you want to make changes in the middle of a multi-year lease.)
_ _ _ If you wish to terminate a cropland lease ending March 1, 2012, and have not already done so, you must serve notice in the manner set out in Iowa Code §562.7 on or before September 1, 2010. This statute does not apply to forage land leases (pasture and hay) or custom farming arrangements, but by tradition, many farm operators have come to expect notice by September 1 and may become surly or even confrontational if notice is delayed past that date.
_ _ _ Basing cropland rent on the CSR (“corn suitability rating” or in some regions “crop suitability rating”) of the soil in question is the most accurate and fair way to arrive at a comparable rent [See Computing a Cropland Cash Rental Rate: http://www.extension.iastate.edu/Publications/FM1801.pdf]. As Hertz Farm Management, Inc., has noted, cash rental rates have tended to lag behind the run up in farm land prices [http://www.hfmgt.com/newsletter/pdf/2011summer.pdf]. Below is a table of farmland values and cash rents from last year's ISU surveys in counties for which I prepare farm land leases:

_ _ _ There is considerable variation, because the quality of the farmland sold does not necessarily correlate with farm leases that were surveyed, either of which might vary from the county's average CSR. In addition, these figures do not reflect the sharp increase in farm land values since last year. Below is a table of farmland sales for Adair County in the spring of this year:

_ _ _ If you throw out the bargain sales and the “through the roof” sales, you see a floor of about $66.66/CSR pt for middling 50 CSR ground and a median range of $73 to $110 / CSR pt for better quality farmland which would predict rent in the $160 to $400/acre range (assuming the historic 4-5% return on investment on farmland). That coincides with the negotiated farmland leases I have written this year, which fall in the following table:

CSR RANGE * * * * * * * MEDIAN RENT/CSR pt
_ 45-55 . . . . . . . . . . . . . $2.20 - 2.80
_ 56-65 . . . . . . . . . . . . . $2.75 - 3.25
_ 66-75 . . . . . . . . . . . . . $3.20 - 3.50
_ 76-85 . . . . . . . . . . . . . $3.30 - 3.60
_ 86-99 . . . . . . . . . . . . . $3.50 - 3.80

_ _ _ This is a considerable jump from the $3/pt that predominated the rents on good quality farm land in this area for the last couple of years. This has sparked considerable interest in flexible or variable rent leases, including hybrid share leases, bushel leases, and net share leases. These types of leases are more complex than cash rent leases, but allow the landlord to share in the returns (as well as the risks) of production and if properly structured afford the landlord the opportunity to take advantage of special use valuation in the event federal estate tax is a concern (current exemption is $5 million per individual or $10 million per married couple).
_ _ _ Good luck with your negotiations! _ _ _ ©2011

Iowa Supreme Court Disclaimer

2010-09-01T10:27:00.000-07:00

The determination of the need for legal services and the choice of a lawyer are extremely important decisions and should not be based solely upon advertisements, certification, specialization or self-proclaimed expertise. A description or indication of limitation of practice does not mean that any agency or board has certified such lawyers as specialist or expert in an indicated field of law practice nor does it mean that such lawyer is necessarily any more expert or competent than any other lawyer. All potential clients are urged to make their own independent investigation and evaluation of any lawyer being considered. These disclosures are required by the Supreme Court of Iowa.

Our Complicated Tax Code

2010-08-30T15:35:00.000-07:00

If you wonder why I sometimes have a bewildered look when you ask a tax question, here is a clue: In her 2008 Annual Report to Congress, the National Taxpayer Advocate, Nina Olson, complained about the Tax Code’s complexity including (among many other examples) “at least 16 separate incentives to encourage taxpayers to save for retirement. These incentives are subject to different sets of rules governing eligibility, contribution limits, taxation of contributions and distributions.” She also criticized the constant changes, pointing out that amendments to the Tax Code were made at the rate of more than one per day in the five years from 2003–2008. Read her report: http://www.irs.gov/advocate/article/0,,id=202276,00.html [Vol. 11, No. 1 Choate’s Notes Spring 2009]

I don't have very much good to say about the Reagan Administration. If you want to see where our federal debt trouble began look there. However, one of the things it got right was the Internal Revenue Code of 1986. It closed a lot of loopholes and greatly simplified our income tax. It was far from perfect, but it was a great leap forward. Since then, we have lost a lot of ground.

Renegotiating Farm Leases

2010-07-30T15:33:00.000-07:00

Now is the time dictated by Iowa law to begin negotiating crop land leases for 2011 or at least notify your tenant/landlord, as the case may be, if you wish to change any of the terms in your current lease. (Remember that mutual consent is required if you want to make changes in the middle of a multi-year lease.)
Basing cropland rent on the CSR (“corn suitability rating” or in some regions “crop suitability rating”) of the soil in question is the most accurate and fair way to arrive at a comparable rent [See Computing a Cropland Cash Rental Rate: http://www.extension.iastate.edu/Publications/FM1801.pdf]. As was the case last year, I think $3/pt will catch most of the rents on good quality farm land in this area. This does not mean rent for your particular farm should go down, if the rent you charge has been stagnant or lagged behind the run up in recent years. At a minimum, you want to keep up with inflation. Increased rain this year has resulted in a tighter supply of quality hay and correspondingly higher demand for hay land for next year.
If you wish to terminate a cropland lease ending March 1, 2011, and have not already done so, you must serve notice in the manner set out in Iowa Code §562.7 on or before September 1, 2010. This statute does not apply to forage land leases (pasture and hay) or custom farming arrangements, but by tradition, many farm operators have come to expect notice by September 1 and may become surly or even confrontational if notice is delayed past that date.
There is some uncertainty regarding whether mailed notice will be sufficient to terminate a farm lease because of an Iowa Supreme Court case this year ruling that mailed notice was unconstitutionally insufficient due process to give to a residential renter in an eviction case. I believe certified mail is still a constitutional form of notice under Iowa Code chapter 562, so long as it is mailed early enough that you know it will arrive before September 1. However, the Iowa Supreme Court has not ruled on that question. If you want to be absolutely certain that you have given adequate notice, you should either have a signed acknowledgment of notice from the opposing party (landlord or tenant) or you should have notice personally served by law enforcement or a private process server.

Staying out of trouble online

2009-09-24T07:20:00.000-07:00

Here is a good article about staying out of trouble (both ethical and practical as well as legal) while using the internet: Doing the Right Thing -- 5 Tech Pitfalls by Dan Reilly

CASH RENT FARM LEASES

2009-08-15T12:44:00.000-07:00

Now is the time dictated by Iowa law to begin negotiating crop land leases for 2010 or at least notify your tenant/landlord, as the case may be, if you wish to change any of the terms in your current lease. (Remember that mutual consent is required if you want to make changes in the middle of a multi-year lease.)

Rents this year are leveling off or declining, in general. Rent on one farm I am involved with that always has competition among renters, went from $250/acre to $230/acre, this year. On the other hand, rent for a farm with a CSR in the low 60’s went from $175/acre to $200. [See also Cash Rental Rates for Iowa 2009]. The huge corn acreage, rising input costs and the slow economy are causing farm operators to bid more conservatively. Nevertheless, low interest rates and fear of inflation continue to keep land values high, which directly impacts farm rental rates.

This does not mean rent for your particular farm should go down, if the rent you charge has been stagnant or lagged behind the run up in recent years. At a minimum, you want to keep up with inflation. Not doing so is like putting your money in a savings account and paying the bank interest to keep it there. Though low, inflation as measured by the CPI was 3.8% last year and had been hanging around 3% for the four years previous. If you only raise your rent every 3 or 4 years, you should consider raising your ask by 10-12.5% just to catch up with inflation.

Basing cropland rent on the CSR (“corn suitability rating” or in some regions “crop suitability rating”) of the soil in question is the most accurate and fair way to arrive at a comparable rent [See Computing a Cropland Cash Rental Rate]. As was the case last year, I think $3/pt will catch most of the rents on good quality farm land in this area.

If you wish to terminate a cropland lease ending March 1, 2010, and have not already done so, you must serve notice in the manner set out in Iowa Code §562.7 on or before September 1, 2009. This statute does not apply to forage land leases (pasture and hay) or custom farming arrangements, but by tradition, many farm operators have come to expect notice by September 1 and may become surly or even confrontational if notice is delayed past that date.

Speaking of pasture, the increase in corn acreage in recent years has resulted in a tighter supply of pasture land and correspondingly higher prices.

Good luck with your negotiations!

Check out Kiva.org

2009-01-09T22:43:00.000-08:00

Kiva is a microlending institution that has been featured on a number of programs and publications. It makes loans to individual and groups of entreprenuers in developing countries through local non-governmental organizations with a proven track record. When the loan is paid back you can lend it to a different entreprenuer or you can withdraw the money through a paypal account. Paypal is donating its services to this project for free. If you don't do anything for 90 days, the money gets donated to Kiva to support what they are doing. Otherwise, none of your money goes to administration unless you make a direct contribution.

I think this is a great way to teach capitalism to underdeveloped countries and I think helping to generate wealth in the poor half of the population will do more to stimulate the world economy than having Americans borrow money they don't have so they can continue to spend beyond their means. It might also spread a little good will and help undo the damage of the last 7 years.

Personally, I tend to favor the agricultural projects and other enterprises where the individual is actually making something rather than retail or reselling, but in the end, I think it all helps. http://www.kiva.org/lender /warren3455

So go to kiva.org and check it out.

HAPPY HOLIDAYS

2008-12-25T07:43:00.000-08:00

I hope you are having a very Merry Christmas and wish you all a Happy New Year. May we all find innovative and resourceful ways to meet the daunting economic, environmental, and political crises we face.

In Johnston High School News

2008-12-09T08:33:00.000-08:00

 CONGRATULATIONS to Mr. Yenger and students who competed in an academic competition, “We the People”, on 11/24. The purpose of the program is to foster a high level dialogue about the Constitution and to understand the principles and how they relate back to modern day events. JHS won 1st place in the state and will compete in the National Finals in Washington, DC in April. Students competing were: Kevin Shi, Fred Shen, Jennifer Ajluni, Alma Jovancevic, Joseph Payne, William McDowell, Ethan Nutter, Neal Herink, & Yelena Varley

Farm Land Real Estate Auction; Adair County, Iowa

2008-11-22T08:45:00.000-08:00

Real Estate Auction Report:

November 19, 2008:

An 80 acre tract of level to moderately sloping riverbottom with 70.3 acres of HEL crop land with a CSR (corn suitability rating) of 79.4 on the tillable acres brought $304,000 at an auction conducted by Hertz Real Estate Services. There were a couple of grain bins on the property and an ROW easement through the middle of the parcel, but I don't think those factors affected the price appreciably. The price comes out to $4,324 per crop acre or $54.46 per CSR pt/a. That is an 8 to 10% drop from the way land was selling this summer. The biggest factors in that drop are the fall in commodity prices, uncertainty about the health of the world economy, and a tightening of credit (though ag credit and particularly ag land credit seems pretty solid compared to the rest of the financial industry).
Here is an interesting side note: The previous purchaser of this property paid $15,750 for the whole 80 in 1964. Even with inflation, a nineteen-fold increase is a pretty good return on investment (42.9% per year), and a stepped-up basis at death, to boot.

So you want to be an Executor

2008-10-29T10:51:00.000-07:00

You are named as executor in the decedent’s last will (so far as we know). You have several options:

1. One is to do nothing and wait for the five-year statute of limitations to expire. This would involve risking the opening of an estate by a creditor who could force you to disgorge assets that you received from the decedent that were not paid to a priority creditor. Priority creditors are the expenses of administration of the estate (including any taxes owed and your court-approved fees), expenses of funeral and last illness, and any unsecured debts the decedent left behind (in that order).

2. Iowa law permits you to distribute an estate by affidavit that is less than $25,000 and does not include real estate (excepting real estate held in joint tenancy) without opening a probate estate. You are still obligated to pay any potential claims against the estate in the order set forth above and can be held personally liable if you distribute funds to the wrong creditor for the amount that should have been paid to the higher priority claim. If you choose this route, I recommend that you file the will with the clerk of court to verify your authority and for safe-keeping of the will in the event litigation follows.

3. You may file a petition for probate of will without present administration. This route encompasses all the factors set forth in No. 2 above, but includes publication of notice to creditors in a local paper for two consecutive weeks and mailed notice to known creditors, heirs at law, and beneficiaries under the will. This action starts the clock on the compressed statute of limitations on a decedent’s estate (4 months from second published notice or 30 days from mailed notice). However, with this option, you should be prepared for the possibility that a creditor will want an administered estate to be opened. At that point you would need to decide if you wanted to continue to serve as executor.

4. The third option would be for you to open a full probate estate. This would result in your obtaining letters of appointment from the district court which would give you the judicial machinery to compel discovery and marshal assets. You would become the personal representative of the estate and would have the following duties:

As Personal Representative of the Estate, your responsibilities include the collection and valuation of the Decedent’s assets, the payment of debts, expenses of administration and taxes, and the distribution of the remaining assets to the persons entitled to receive them.

Your first task is to identify and value all property in which the Decedent had an interest. Each item of property, together with its value, will be included in an estate inventory. By law the inventory must be completed and filed within 90 days after the date of your appointment. The probate inventory includes assets that pass outside of this will, such as joint tenancy property, life insurance proceeds, retirement accounts, transfer on death accounts, and annuity contracts. The probate code requires this to fulfill the orderly transfer of assets at death function of the probate process.

As soon as practicable following the admission of the Will to probate, notice of the admission of the Will to probate must be given by ordinary mail addressed to each heir of the decedent, and each devisee under the Will, and the creditors of the estate whose identities are reasonably ascertainable. This notice must be mailed to such person’s last known address.

Complete records must be kept of all cash and investment transactions. All receipts should be deposited to and all disbursements should be made by a check drawn on an estate checking account.

An Iowa Inheritance Tax Return would have to be filed, not later than the last day of the ninth month after death, but no tax would be due because the gross value of the estate assets are less than $25,000.00. Because the estate is less than two million dollars, no federal estate tax return is required.

The decedent’s final income tax returns covering the period through the date of death must be filed and any tax paid. You must obtain a federal tax identification number for the estate.

It may also be necessary to file federal and state fiduciary income tax returns for the estate. The number of returns filed and the filing deadlines will depend upon the income of the estate, the length of time the estate remains open and the fiscal year selected for the estate. It is to your advantage for the estate to generate at least enough income to offset the administrative expenses of the estate, including fees, if possible.

After all known debts, administration expenses, and taxes have been paid or provided for, a Final Report and accounting will be prepared. Depending on the length of the period of administration, it may be necessary to prepare one or more intermediate reports and accountings. Copies of the reports must be given to all persons interested in the estate. When the estate is closed, the Final Report will be filed with court. Normally, final distribution of the assets will await the closing of the estate, although as I said, many of the financial assets are being transferred directly into the residuary trust. However, depending on such factors as the size of the estate, the needs of the beneficiaries, tax considerations; earlier partial distributions may be in order.

As Personal Representatives, you are entitled to compensation for services performed and responsibilities assumed, and for reimbursement for expenses. The fee you receive is subject to income tax but not social security tax since you are not a professional fiduciary. You are entitled to waive any or all of your executor fee. All fees are subject to court approval.

Boundary Line Dam Easements

2008-09-17T10:15:00.000-07:00

Here is a tidbit from my agronomy days applied to agricultural law: Soil is composed of four solid constituents: sand, silt, clay, and organic matter. The most productive soil is a loam, which contains roughly equal proportions of sand, silt, and clay (and as much as 4 or 5% organic matter). Most of western Iowa is blessed with clay loam and on the riverbottoms with silty clay loam thanks to wind-blown silt particles called loess (pronounced “luss”) left behind by the glaciers after the last ice age. Silt is, by far, the most easily eroded soil component. Hence the need for silt dams and fences to prevent bodies of water from filling up with silt. Structures that catch silt such as dams and terraces have to be cleaned out periodically to maintain their water holding capacity. For instance, when one builds terraces with state conservation cost-sharing money, one signs a maintenance agreement that ensures that the terrace’s design capacity will be maintained. By the same token, because of its erosive nature, silt makes a poor dam material. Earthen dams and terraces must be built of clay, which is a much smaller particle, but which has high particle adhesion.

It has been my experience as a farmer that nothing is harder on dams than cattle. In fact, if you build a dam with conservation cost-sharing assistance, you will be required to sign an agreement requiring you to fence cattle away from the dam and allow grazing of the dam only under limited circumstances. It is also for this reason that conservationist are encouraging farmers to fence cattle away from river banks.

My adversary suggested in his letter that a dam is higher or longer than the original easement signers contemplated. Because there is a fence across the dam, I think it is safe to say that the dam height has not changed at least since the fence was put in. In addition, the original dam height may have been too short. When I worked for the Soil Conservation Service we used to call home-made under-capacity dams (which seemed to be common in the 70’s) “doodle dams” because they would be washed out by the first heavy rain. Any structure designed to retain surface water should be designed with the capacity to hold the runoff from a Q-25 storm. The parties could have the Natural Resources Conservation Service (NRCS) evaluate the dam to see if it is sized appropriately for the watershed it serves. There may even be cost-share money available for the structure. But even without that, the clear purpose of the easement was to protect the clients’ pond from silt runoff and the current size of the dam no doubt reflects the wisdom of the years with respect to the sizing of the dam, regardless of the size speculated in the original easement agreement.

Cash Rent Leases

2008-07-30T07:48:00.000-07:00

Now is the time dictated by Iowa law to begin negotiating crop land leases for 2009 or at least notify your tenant/landlord, as the case may be, if you wish to change any of the terms in your current lease. (That requires mutual consent in the case of multi-year leases.)

Rents on the whole will rise this year. Aside from high grain prices, cash rents are at a historically low level in terms of their percentage of land value. (See William Edwards' excellent analysis for ISU extension.) As interest rates rise, land values will decline and with them, so will cash rental rates but at a slower rate as the return on investment moves back toward historic levels.

In the meantime, we are dealing with the current environment. Based on recent sales, land prices in the Adair and Guthrie County areas seemed to have topped out in the $60 to $65 per CSR point range. Using a 5% ROI on $60 per CSR yields a $3 per CSR point cash rent. I have seen cash rent as high as $4.75 per CSR point, but I think $3/pt will catch most of the rents on good quality farm land in this area.

A number of landlord/tenant negotiators are switching from cash rent to a hybrid lease in which the rent is paid in whole or in part in bushels of grain. The production decisions and production risk remain with the tenant (and its crop insurer) but the landlord assumes some of the market risk and relieves the tenant of some cash flow requirement, which is attractive to the tenant in this period of rapidly escalating input prices.

Good luck with your negotiations!

Iowa Smoking Ban Rules

2008-07-15T13:40:00.000-07:00

Is your business or public place in compliance with Iowa's new smoking ban rules?

Smoking Ban Resources

You must post signs with the violation reporting phone number and website at each entrance and in each vehicle.

Tax Tip

2008-07-01T09:31:00.000-07:00

Remember: Internal Revenue Code Section 179 was amended for 2008 to allow the expensing of up to $250,000 of machinery and equipment purchases (more in some areas).

Land Auction Results

2008-07-01T09:04:00.000-07:00

A farm land auction was held in Stuart, Iowa on June 30, 2008. Here is my analysis:

Parcel 1: 240 acres; crop acres 224.4; FSA corn yield 108; CRP acres 10.5;

ave CSR 60.66; $3,750/acre; $61.28/CSR pt

Parcel 2: 198 acres; crop acres 169.5; FSA corn yield 117; CRP acres 15.6;

ave CSR 56.08; $3,575/acre; $63.84/CSR pt

Parcel 3: 155 acres; crop acres 150.7; FSA corn yield 106; CRP acres 0.7;

ave CSR 62.61; $4,000/acre; $63.89/CSR pt.

Parcel 4: 130 acres; crop acres 115.9; FSA corn yield 108; CRP acres 9.7;

ave CSR 52.94; $2,950/acre; $55.72/CSR pt.

Other factors: Tile & terraces; Parcel 2 included 15,000+bu of grain bins and drying system; Parcel 4 bisected by creek

Chris Nelson for Iowa House seat 58

2008-06-04T22:03:00.000-07:00

Support new ideas and intelligent leadership on the local level, too!

Go to Chris Nelson's website to see how you can help:

http://www.putnelsoninthehouse.com/

No cost (and probably no value) for this plug.

All opinions expressed are strictly those of the blog author.

Iowa Crop Land Cash Rent

2008-03-27T07:19:00.000-07:00

We had a cash rent auction for 312 acres of cropland with an average CSR of 69.52. It is an unusual way to set rent, but required in this instance because the land is held by an estate with litigating beneficiaries. The auction started at $310 per acre and ended at $334 per acre-- by far the highest rent in my practice. It is even higher when you consider that the 312 acres includes 5.1 acres of required waterways and another 5.5 acres of permanent pasture and hay ground. The crop acres will be planted to corn. High prices, high yields and high crop revenue insurance are required for that kind of rent price to make sense. Good luck to all the farmers out there. This year has the makings of a higher stress growing season than usual.

ISU cash rent survey

Tax Tips

2008-03-08T14:09:00.000-08:00

1. With the slowing of the economy and the contraction of the housing industry, I am seeing a sharp increase in people tapping into their 401K, IRA, or other retirement accounts. This is a risky thing to do. Not only are these folks losing their retirement nest eggs and the tax deferred compounding that is the secret to having a comfortable retirement fund, they often do not have enough taxes withheld and are greeted with a hefty tax bill the following spring. This is because, in addition to the 10% penalty for withdrawing the funds early, taxpayers are often bumped up into a higher tax bracket or lose tax credits, such as the child tax credit. If you absolutely have to have the money, consider borrowing the money with the retirement account as collateral so that you do not have the distribution penalty and are disciplined to pay the funds back. Be aware that there are regulations restricting how you can borrow against your retirement plan and that you will be in the same tight spot, paying taxes and penalty, if the lender has to foreclose on the retirement fund.

2. Here's another scenario: Retiree is taking a regular withdrawal from his investments. He is taking out about the same amount as the funds are generating in interest, dividends, and capital gain. However, he is being ripped off. Here's why: His funds are primarily invested in dividend-generating stocks and the stocks are set to reinvest the dividend. Normally this is a good practice. It helps you compound your investment and the investment is usually free or very low cost. However, since the retiree is drawing funds out of the account, he should take distribution of the dividends instead of paying his broker fees for liquidating stock to make his distribution. It also makes for an accounting nightmare as the basis of each stock is constantly changing with all the purchases and sales of irregular numbers of shares.

3. If you are thinking about buying an annuity, please, please, talk to your tax adviser first, particularly if you are over 65. Whatever you do, do not get tax advice from the guy who is going to get a big commission for selling you the darn thing.

Good luck with your taxes ("the cost of civilization," as OWH said).

from Johnston High Announcements

2008-02-28T10:35:00.000-08:00

ANNOUNCEMENTS
THURSDAY, FEBRUARY 28, 2008
TODAY IS AN “A” DAY

☺ CONGRATULATIONS go out to the Mock Trial Team A/B for their work at the Dubuque Mock Trial Invitational last Saturday. The team, consisting of freshman Ananya Kumar, Jake Hanson, sophomores William McDowell, Yiming Qin, Daniel Ratekin, Yelena Varley, John Temple, juniors Neal Herink, Alma Jovancevic, Huzzaifa Mohammad, Sarah Engstrom and Brittany Deal, won the Civility Award for outstanding professionalism (emphasis added.).

Foggy Bottom Farm

2008-02-21T08:51:00.000-08:00

Check Out This Entrepreneurial Website:

www.foggybottomfarm.com

Iowa Tax Credits

2007-12-26T09:28:00.000-08:00

As of July 1, 2007

• Earned Income Credit ($8.9 million for 2004, $9.8 million for 2005) – Section (§) 422.12B

• Tuition and Textbook Credit ($14.3 million for 2004, $15.2 million for 2005) –§422.12(2)

• Child and Dependent Care Credit ($8.2 million for 2005) – §422.12C

• Claim of Right Credit – §422.5(10)

• Cow-Calf Credit (capped at $2 million for 2007 ) - §422.120

• Motor Fuel Tax Credit ($5.9 million for 2001, $5.4 million for 2002) – §422.110

• Iowa New Jobs Credit – §§422.11A & 422.33(6)

• Research Activities Credit – §§422.10 and 422.33(5) & 15.335 & 15A.9(8)

• Investment Tax Credit – §§15.333, 15.333A, 15E.193B(6), 15A.9(4), 422.11F, 422.33(12) & 422.60(5)

• Alternative Minimum Tax Credit – §§422.11B, 422.33(7) & 422.60(3)

• Assistive Device Credit – §§422.11E & 422.33(9)

• Historic Preservation and Cultural and Entertainment District Tax Credit – §§422.11D, 422.33(10), 422.60(4) & 404A.2

• Endow Iowa Tax Credit (capped at $2 million for each year 2005-2007, and capped at $2 million plus a percentage of gaming revenues for 2008 and subsequent years) – 422.11H, 422.33(14) & 422.60(7)

• Venture Capital Credit – Investments in Qualifying Business and Community-Based Seed Capital Funds ($824,872 to be claimed on 2007 tax return) – §§15E.43, 422.11F, 422.33(12) & 422.60(5)

• Venture Capital Credit – Investments in Venture Capital Funds ($185,625 to be claimed on 2007 return) – §§15E.51, 422.11G, 422.33(13) & 422.60(6)

• Ethanol Blended Gasoline Tax Credit – §§422.11C & 422.33(11)

• Renewable Energy Tax Credits – §§422.11J, 422.33(16) & 422.60(8)

• Early Childhood Development Tax Credit – §422.12C

• Wind Energy Production Tax Credit - §§422.11J, 422.33(16) & 422.60(8)

• Economic Development Region Revolving Fund Tax Credit – §§422.11K, 422.33(17) & 422.60(9)

• Wage-Benefit Tax Credit – §§422.11L, 422.33(18) & 422.60(10)

• High Quality Job Creation Program – §15.329

• E85 Gasoline Promotion Tax Credit – §§422.11O & 422.33(11B)

• Biodiesel Blended Fuel Tax Credit – §§422.11P & 422.33(11C)

• Ethanol Promotion Tax Credit – §§422.11N & 422.33(11A)

• Agricultural Asset Transfer Tax Credit – §§422.11M & 422.33(22)

• Film Qualified Expenditure Tax Credit – §§422.11T, 422.33(24) & 422.60(13)

• Film Investment Tax Credit – §§422.11U, 422.33(25) & 422.60(14)

For more information about these and other Iowa tax credits, see http://www.state.ia.us/tax/taxlaw/Taxcredits07.pdf

Millie's new blog

2007-08-10T08:29:00.000-07:00

Visit Millie's new blog:
dutchrabbit2.blogspot.com

See her pictures at:
Millie's Flickr Gallery

2007-07-19T10:05:00.000-07:00

Cash Rent per CSR pt

CSR . . . . . . . $ Rent/CSR pt . . . . . . . Rent/acre

85-100 . . . . . . $2.75 . . . . . . . . . . . . . . $240-275

75-85 . . . . . . . $2.60 . . . . . . . . . . . . . . $195-240

60-75 . . . . . . . $2.50 . . . . . . . . . . . . . . $150-195

45-60 . . . . . . . . $2.40 . . . . . . . . . . . . . . $110-150

This is a rough guideline only: Tenants have to take into consideration factors like the lay of the ground, the area of point rows (which result in higher inputs and less yield), propensity to flood, proximity to other operations and grain storage, etc. These figures are for actual crop acres planted; tenants will not be able to pay this amount for the total acres on which landlords are taxed, which includes waterways, headlands, field borders, fencelines, and waste.

Gwen in China

2007-06-06T11:36:00.000-07:00

Follow Gwen's experiences as she serves as Borlaug-Ruan intern to the rice research program at Peking University in Beijing, China:

www.gweninbeijing.blogspot.com

Pictures at:

www.flickr.com/photos/8709356@N05

Ag Landlord Partnership Considerations

2007-01-17T15:16:00.000-08:00

I have advised many regarding the dangers associated with a simple or general partnership. One of the problems is that they spring up spontaneously as the default business entity whenever two or more individuals or entities enter into a joint venture that involves the sharing of income and expenses. General partnerships in Iowa are governed by Iowa Code chapter 486A (Uniform Partnership Act). One of the major hazards is that each partner is an agent for the partnership and thus can bind or act on behalf of the partnership. There are exceptions to this rule. For instance, a lease is generally deemed not to create a partnership even though a crop-share agreement creates a very partnership-like sharing of income and expenses. However, courts have found in numerous instances that the facts of a particular case indicated that the tenant was the agent for the landlord. For instance, if the tenant routinely sells the landlord’s share of the crop at the local elevator and the landlord does not object, the local elevator can probably safely assume that the tenant has authority to sell the landlord’s share without any authorization from the landlord. It is for this reason that most leases, and especially crop share leases include a paragraph stating that the tenant is not an agent for the landlord. Another example is jointly owned real estate. Even though each square inch of property is owned together as parts of a jointly-held undivided whole, mere joint ownership does not give rise to the creation of a partnership. I believe the reason for this is that the courts find the idea that one joint owner could sell the property without the signature and consent of the other owners repugnant. However, as with the lease, the way in which the joint owners behave can change the default presumption and create an agency, whether memorialized in writing or not.
On the other end of the spectrum, the officers of a corporation are clearly agents of the owners (or shareholders) and the consent of the owners would not be required prior to an officer selling, mortgaging, or otherwise encumbering real estate or other assets of the corporation, unless the world is put on notice as to the specific restrictions on the powers of the officer or special requirements for certain types of transactions, such as sale, purchase or encumbrance of real estate.
The statutes laying down the ground rules and default provisions for various forms of business entity all presume some level of differentiation between management and ownership. For instance, the commentary to Iowa’s new limited partnership act states:
The new Act has been drafted for a world in which limited liability partnerships and limited liability companies can meet many of the needs formerly met by limited partnerships. This Act therefore targets two types of enterprises that seem largely beyond the scope of LLPs and LLCs: (i) sophisticated, manager-entrenched commercial deals whose participants commit for the long term, and (ii) estate planning arrangements (family limited partnerships). This Act accordingly assumes that, more often than not, people utilizing it will want: strong centralized management, strongly entrenched, and passive investors with little control over or right to exit the entity. The Act’s rules, and particularly its default rules, have been designed to reflect these assumptions.
My concern is that we may be moving in the wrong direction, even with a limited partnership. It would seem to me that strongly-entrenched, central management is what we have now and that it is the desire of the off-farm heirs that management as it relates to the landlord role be decentralized somewhat. I can understand if you find this advice frustrating. After all, when we began this process, I initially discussed a limited liability company [LLC] as a solution for the desire to limit liability that the off-farm heirs may face for problems that would be largely beyond their control and as a means to easily transfer fractional interests. However, when I saw the operating agreement that tenants’ attorney drew up, it was clear to me that an LLC posed the threat of further concentrating authority with the tenants, particularly if they were the only managers. Since then we have discussed limited liability partnerships [LLPs], limited partnerships [LPs], and general partnerships (mercifully, limited liability limited partnerships [LLLPs] were repealed in Iowa, effective Jan. 1, 2006).
At this point I am weighing three options: 1. Leave matters as they are with ownership of the land in joint ownership as tenants in common of undivided fractional interests. 2. General partnership. 3. Limited partnership with someone other than a tenant as the General partner.
1. Problems:
a. Requires ancillary probate in Iowa should an out-of-state owner pass away.
b. Still need a P.O.A. to sign up for USDA farm subsidies (could be someone other than Tenant) or all owners would have to sign any farm program paperwork as that became necessary (usually twice a year).
c. May have some sort of partnership already based upon the way the farm has been handled and without a written agreement, no one can be sure what the limits are.
1. Opportunities:
a. Each owner could have his or her separate lease with tenants; you could have a mix of cash rent and crop-share leases, depending on the owner’s preferences. (Such an approach might reduce the negotiating power of the owners, though not necessarily. You have a certain amount of leverage because you own a share of tenants’ homes.)
b. You might learn more details about the workings of the federal farm programs.
c. There is no doubt that each individual owner has the authority to have the property partitioned allowing the owner to obtain his or her fair market value of his or her share of the farm.
2. Problems:
a. No limitation on liability, which might be troublesome for off-farm owners who have no control over actions of on-farm owners. (Could require tenants to indemnify landlords as part of lease, which would cover most liability issues not already covered by property owners liability insurance.)
b. The right to partition, if any, will have to be spelled out in the agreement and will be limited to what the agreement says.
c. Minority owners may feel like they are being dictated to by the majority and there is some danger that the majority could take advantage of the minority. With such a small group it is difficult to avoid friction without requiring unanimity and that may not always be possible, particularly when moving to subsequent generations.
2. Opportunities
a. A written partnership agreement will spell out rights and limitations and can be amended as circumstances change.
3. Problems:
a. Management and liability for that management is concentrated in the general partner(s). (On the other hand, there is not that much management required on the landlord side of a crop-share lease agreement. It is primarily a question of auditing the tenant and evaluating whether the owners would be better off with a cash rent agreement.)
3. Opportunities
a. A written partnership agreement will spell out rights and limitations and can be amended as circumstances change.
b. The right to partition, if any, will have to be spelled out in the agreement and will be limited to what the agreement says. By statute, the right of limited partners to exit is severely restricted.c. Minority owners may feel like they are being dictated to by the majority and there is some danger that the majority could take advantage of the minority. With such a small group it is difficult to avoid friction without requiring unanimity and that may not always be possible, particularly when moving to subsequent generations.

Condolences

2006-09-19T10:16:00.000-07:00

Our thoughts and prayers go out to those families who have lost loved ones.