Summer is an incredibly busy time- good thing we have those extra hours of light. I guess you are very familiar with each piece of machinery and equipment right about now. Do you have an Inventory List of all of that stuff? Such a list is helpful for insurance, for income tax- depreciation, and for a balance sheet.
I do not run across very many farmers who are happy when they pay their property insurance bill- making sure that your insurance agent knows just what is on the farm and its value is one way to make sure that you are not still insuring equipment that is long gone. Equipment that is on the farm for more than a year is capital equipment that should be depreciated, or should have been depreciated. Make sure you tell your tax preparation person what capital items you bought or sold this year. Your equipment is an asset on your balance sheet- more than likely the value of the equipment is greater than the debt you still have on the equipment. So it is part of your equity in the farm. If you have a farm loan, or are thinking of borrowing money for the farm, this equity is very important for the lender to know about. They may have an appraiser estimate the value of your equipment, or they may do the estimating, but if you have a current list, it is easier for them to do their work.
Sometimes farms need cash, have unused equipment hanging around and sell it in order to create some cash. This could be a taxable event, let your tax preparer know. These last couple of years the value of scrap steel has been high and I have seen trucks go by that are piled high with old equipment that is being sold for scrap.
The Farm Financial Workbooks on-line from the Vermont Farm Viability Program, have a place where you can list several pieces of equipment. Open one of the workbooks and select the Beginning Inventory worksheet. Or you can make this list on lined paper, or in a spreadsheet or word processing program. The most important things to list are: description, make, model, and size; date purchased; original cost; and today’s market value (be sure to note when ‘today’ is). Then you can give a copy of this list to your tax person and insurance agent.
Another person who might be able to use such a list is the executor of your estate after you die. Sometimes family members know the value of farm machinery, and sometimes they don’t. If you have a listing, it can be a big help to someone you love.
Dennis Kauppila, UVM Extension, July, 2010