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  1. #1
    Join Date
    Mar 2015
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    Fountain County, Indiana
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    305

    Default Depreciating Hive Equipment

    I'm curious how others handle purchasing hive equipment. Straight expense? Depreciate over 7 years? I'm setting up Quickbooks and would like to track when equipment is going to be nearing the end of its lifespan so I can anticipate replacement costs in the budget. Obviously I will talk with my accountant before making my final decision on how to handle this, but I would like input on what others are doing before I talk with him. He has extensive ag experience, but zero in apiary accounting. Thanks!
    Indiana, 3rd year, 10 hives, www.facebook.com/RussellHoneybees

  2. #2
    Join Date
    Apr 2012
    Location
    Perth Western Australia
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    253

    Default Re: Depreciating Hive Equipment

    In Australia the tax Office deems the life of hive at 13 years. Fact, some last a lot longer, others a lot less.

    Geoff

  3. #3
    Join Date
    Jan 2014
    Location
    Sandpoint, ID, USA
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    524

    Default Re: Depreciating Hive Equipment

    I think its probably going to be a difficult question to ask. I wonder how many commercial beeks even account for such a thing. You always hear of people who have bee boxes handed down to them from generations ago. How are you going to estimate a useful lifespan of a box like that?

    I think the question begs to ask, what is the lifespan of a box? It all depends on how you handle it. If a box lasts generations, then that means there was a maintenance aspect to it. Something that I would actually factor in instead of a depreciation. Which tells me that at the end of its life, your throwing it away instead of making small repairs to keep it in service.

    Look at maint. cost more than depreciative values, IMO. It all starts with the wood type, how its built and weatherproofed.

    Are you going to use butt joint, box joint boxes? Are you going to wax dip or just paint? I would almost bet a box is going to need a coat of paint every 3-4 years to keep its service life to the max. Your better off amortizing these things to help establish your profit margins.

    ...maybe I'm just flat out wrong about all of this, lol.

  4. #4
    Join Date
    Mar 2015
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    Fountain County, Indiana
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    Default Re: Depreciating Hive Equipment

    It's Greek to me, that's why I'm asking what commercial guys do. We run a regular farm and depreciate all we can with that. It seems strange to me that an ag operation wouldn't depreciate their costs on such a main component of the business. I've googled, and found advice both for and against. It would be nice to spread some of this expense into years when I may (hopefully) be profitable in order to reduce tax liability.

  5. #5
    Join Date
    Jan 2014
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    Sandpoint, ID, USA
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    524

    Default Re: Depreciating Hive Equipment

    So are we talking about this in the sense of taxes or replacement costs?

  6. #6
    Join Date
    Mar 2015
    Location
    Fountain County, Indiana
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    305

    Default Re: Depreciating Hive Equipment

    Both. Looking at the published IRS guidelines it looks like if you are going to claim it as a capital asset you have to depreciate it? I can't imagine having thousands in equipment that is not listed as an asset

  7. #7
    Join Date
    Dec 2006
    Location
    St. Albans, Vermont
    Posts
    6,663

    Default Re: Depreciating Hive Equipment

    I agree. I think you can expense the purchase, and depreciate the equipment over 7 years. Not the bees though. If someone gives you the equipment, you can't expense or depreciate it.

  8. #8
    Join Date
    Dec 2005
    Location
    Brasher Falls, NY, USA
    Posts
    33,189

    Default Re: Depreciating Hive Equipment

    But, you can't do both, can you? If you expense the purchase, can you also depreciate it? Seems like double dipping.

    I haven't purchased a lot of woodenware over the years, until the last two years. I took the cost of the boxes, glue, staples, and paint as an expense in the year that the purchase occurred.
    Just because something is new to you, doesn't mean it is new, or revolutionary. Mark Berninghausen

  9. #9
    Join Date
    Jan 2005
    Location
    Hamilton, Alabama
    Posts
    1,799

    Default Re: Depreciating Hive Equipment

    The only time it makes sense to depreciate is when the bulk of your income will be from the bees. This can smooth out the cash flow curve, especially in very good years.

    If you expense it and can take it out of other farming profits, you may be able to reduce the profit enough to justify this treatment. This is most useful when an established farming business adds a new venture such as beekeeping.

    If the bee equipment means an overall loss where a large portion is other farm income, you may be able to book a carried loss to offset income over the next few years. Ask your accountant about this.

    I've leaned heavily toward taking immediate write off when feasible because it almost always gives me the most benefit. This is because I am using a farm loss to offset other non-farm income. I am not a commercial beekeeper so take this with a grain of salt!
    DarJones - 46 years, 16 colonies (max 40), sideliner, treatment free since 2005, 11 frame broodnest, small cell

  10. #10
    Join Date
    Aug 2012
    Location
    Barrie, Ontario, Canada
    Posts
    1,293

    Default Re: Depreciating Hive Equipment

    In Canada, the purchase of any equipment over $500-$1000 is a capital expense and there is a formula to claim it over several years. One exception is livestock(bees), which can be claimed entirely in the year they are purchased.
    Adam - Zone 5A
    www.adamshoney.com

  11. #11
    Join Date
    Dec 2005
    Location
    Brasher Falls, NY, USA
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    33,189

    Default Re: Depreciating Hive Equipment

    Quote Originally Posted by Fusion_power View Post
    I've leaned heavily toward taking immediate write off when feasible because it almost always gives me the most benefit. This is because I am using a farm loss to offset other non-farm income. I am not a commercial beekeeper so take this with a grain of salt!
    Makes sense to me Dar. Seems to me like if an expense claimed in one year would reduce your Profit to your tax advantage, then that expense should be claimed in that year's Profit and Loss from Farming, Schedule F. But if it is a really large expense, say $5,000.00 or $10,000.00 or more, then it may be more advantageous to expense that investment over a time span that makes sense to an individuals circumstances.

    As far as Business Planning, knowing that one will have to replace boxes over time, you may have to try to figure out how long your boxes last and plan for their replacement, so many annually.

    In Beekeeping, it is really hard to maintain a certain colony count. One is either expanding or contracting. You will either have more equipment than you actually need or you will need to buy more equipment to keep up with expansion. Or even to try to stay where you were.
    Just because something is new to you, doesn't mean it is new, or revolutionary. Mark Berninghausen

  12. #12
    Join Date
    Mar 2015
    Location
    Fountain County, Indiana
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    305

    Default Re: Depreciating Hive Equipment

    I know you can't expense and depreciate the same item. I think if I expense it in Quickbooks I can also receive it as an item with an asset value and keep track of my inventory that way. I think. Looking at my numbers for last year, my equipment costs were about 10% higher than they should have been because I thought I had more equipment than I did and had to order in smaller quantities when things weren't on sale. Poor planning

  13. #13
    Join Date
    Apr 2014
    Location
    Powhatan, Virginia, USA
    Posts
    129

    Default Re: Depreciating Hive Equipment

    Dar has the gist of it. A capital asset is usually an expensive item that you as business set a dollar value on and handle all equipment purchases the same way. If your set value is $1000 then an extractor or other durable item costing 1200 would be capitalized and depreciated over time. Common time periods are 3 years (minimum), 7 years for equipment, longer for buildings. It is not good to lump items together to make them "an asset" because you have to show where they are if audited and track their value if sold, repaired, or thrown away. A 600 dollar extractor would be expensed in the year purchased. You still would put it in quickbooks as an asset for tax value if you have to pay property taxes on equipment.

  14. #14
    Join Date
    Mar 2014
    Location
    Petaluma, CA
    Posts
    34

    Default Re: Depreciating Hive Equipment

    If you decide to depreciate; it would be at the 7 year class life. For how important equipment is in the structure of a beekeeping operation I would make the assumption to classify it as a fixed asset with a depreciable life.

    If you're spending more than 5,000 on equipment on one invoice than capitalize it, don't expense it. Anything below 5,000 I would attempt to expense if applicable. Depends on your capitalization policy (talk to your CPA about that), and the size of your business. But this is my personal rule of thumb. Although I commonly capitalize items that are less than $1500.

    Try to play the system, but stay within reasonable doubt, and don't ever get cocky. You don't want your business audited.

    Source: CA CPA, sitting at my computer, currently auditing.

  15. #15
    Join Date
    Aug 2014
    Location
    Houston, TX, USA
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    224

    Default Re: Depreciating Hive Equipment

    Your accountant will have the best answer. In general, a one time expense will minimize tracking requirements and recognizes the expense when the cash goes out (unless you have to take a loan). Depreciation spreads the expense over the reasonable life and makes the near-term company book value look better for resale. Some things must be depreciated; other things are not listed and appear optional. I don't see any mention of bee equipment. Also be aware that tax accounting and business accounting may be different. I'm sure you have much better knowledge and experience with the farm accounting than mine from the not-for-profit environment.

    See IRS Pub https://www.irs.gov/publications/p22...link1000218139

  16. #16
    Join Date
    Jul 2003
    Location
    Bartonville, TX USA
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    479

    Default Re: Depreciating Hive Equipment

    Check with your accountant and see if you qualify to use section 179.
    "Beware of all enterprises that require new clothes"
    Henry David Thoreau, Walden

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