sealPurdue Agriculture Briefs

May 2000

Economists advise farmers to plan now
for 2000 tax year

WEST LAFAYETTE, Ind. – Now is the time for farmers to begin thinking about how they'll file their 2000 tax returns, say two Purdue University agricultural economics professors.

Farmers should get an early start taking stock of their farming operations and document any changes that could affect their tax liability in the year ahead, say professors George Patrick and Gerald Harrison.

Before completing a business transaction, farmers should consider the tax consequences, Patrick says. That's especially important when it comes time to sell the farm. Farmers can spare themselves much grief – and a hefty capital gains tax bill – if they trade their property for other farmland or investment real estate rather than accept cash. Such trades between owners of "like kind" assets are nontaxable.

"Some of the saddest calls I've received come from farmers who say, 'I sold my farm. Now how long do I have to reinvest the money?' Quite a few farmers end up making a mistake by letting the money come into their hands," Patrick says.

Conversely, some farmers may benefit from tax laws that favor selling, not trading, old farm machinery. A farmer purchasing a new tractor, for instance, can claim depreciation and lower both his taxable income and self-employment earnings, Patrick says. "The gain on the sale of the old tractor may be ordinary income, but it is not income for self-employment tax purposes. So selling a fully depreciated old asset may reduce the tax bill over time," he says.

The tax code allows farmers a generous estate tax break, Harrison says. Under current law, a farmer can take advantage of an exemption amount, special use valuation of farmland and family-owned business interest deduction, and avoid inheritance taxes on an estate worth up to $2.07 million. If assets are divided between husband and wife, the tax-exempt amount jumps to $4.14 million.

Harrison says farmers also can invest their money in Roth IRAs, a relatively new individual retirement account with income tax-free earnings. Farmers who filed their 1999 returns on or before March 1 may still invest in a '99 Roth IRA under the allowable limit up to April 17.

"Traditionally, farmers didn't have these kinds of retirement plans – they invested in land," Harrison says.

Farmers shouldn't be tripped up by Social Security myths. "Some farmers think that when they retire they have to get on cash-rent to satisfy Social Security. That's not true and never was true," Harrison says. "I can retire and go on a 'nonmaterially participating' share lease and file the farm business and income expenses on Form 4835."

Internal Revenue Service Form 4835, titled "Farm Rental Income and Expenses," covers the reporting of income a farmer receives from crops or livestock raised by others on his land through a share lease. Income derived as a "nonmaterial participant" is not subject to self-employment tax. For a detailed explanation of nonmaterial participation, refer to the IRS's Farmer's Tax Guide. Copies are available at the Purdue Cooperative Extension Service office in your county.

Patrick and Harrison offer these other tax tips:

• Take a deduction for purchased animals that die, are lost or stolen during the year. "It depends on how much you paid for the animal and when you bought it," Patrick says. "Usually, it's the purchase price minus depreciation that equals the adjustment."

• Set up charge accounts at the hardware store, elevator and other merchants you do business with. "You have to have a record of expenditures," Patrick says. "Every dollar you don't deduct will cost you, both in income and self-employment taxes."

• Conservation Reserve Program (CRP) payments are again taxable for active farmers and materially participating landlords, following a recent appellate court decision. "If you've stopped paying CRP tax because of a 1998 tax court case that held the opposite, you may be hearing from your accountant or from the IRS," Harrison says. "Cash renting and nonmaterially participating landlords are not required to pay self-employment tax on CRP," Harrison says.

Most of all, don't take shortcuts, and seek professional help before making major decisions affecting tax liability.

"Some farmers may go to such lengths to avoid paying tax that they do some things that don't make sense financially," Patrick says.

For further information, contact Patrick or Harrison at 1-888-398-4636 or check the Purdue Department of Agricultural Economics Web site.

CONTACTS: George Patrick (765) 494-4241,; Gerald Harrison (765) 494-4216,

Community practice clinic
mirrors 'real world' for vet students

WEST LAFAYETTE, Ind. – Veterinary teaching hospitals have a long history of providing future veterinarians with challenging referral cases for study. Animals in need of complicated surgical procedures, radiation treatment for cancers or complex drug therapies are regularly referred to facilities such as Purdue University's Veterinary Teaching Hospital for treatment.

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But a large number of the students who graduate from vet school will not practice those types of specialized medicine – rather, they will work in community practices that focus on primary care and pet wellness.

"About half of all vet schools in the U.S. now have some sort of community practice clinic attached to them," explains Dr. Steve Thompson, director of Purdue's Wellness Clinic and one of two full-time practicing clinicians who double as faculty in the veterinary teaching hospital.

At Purdue, students are eligible for the elective in their fourth year of study. Under the supervision of Thompson or Dr. Alondra Martin, they perform all of the tasks of a regular community clinician. Prior to the development of the Wellness Clinic, students' only exposure to the community practice setting was through a required externship, also taken in their fourth year of study.

"The students gather medical and behavioral histories from the client, perform a complete physical exam on the pet, and assist with the diagnosis and development of a treatment plan," Thompson says. "We also work on issues such as client communication, veterinary economics and practice management."

The clinic's services are available to all pet owners, including those with exotic animals and non-traditional pets, who reside within a defined geographic radius of the university.

"We do a lot more than just dogs and cats," Thompson says. "About 15 percent of our current caseload is made up of exotics like ferrets, iguanas, large birds and even fish."

Students are also exposed to the latest developments in progressive veterinary medicine practices.

"Veterinary medicine mirrors human medicine in many ways, including an increased focus on wellness issues and special care for aging animals," Thompson says. "Nutrition and behavior consultation as well as animal dentistry are becoming more standard rather than specialty services. Since pets are living longer, their nutritional and medical needs are changing. The community practice elective gives students exposure to all of these issues in an actual practice setting."

CONTACT: Steve Thompson, (765) 496-3399,

Most foodborne illnesses stem from improper cooling

WEST LAFAYETTE, Ind. – Nationally reported incidents of foodborne illness caused by E. coli bacteria have increased consumers' awareness of the importance of proper food handling and thorough cooking, but the most common cause of food-related sickness is far from common knowledge.

"Improper cooling is the No. 1 reported cause of foodborne illness in the United States," says Richard Linton, an associate professor of food safety at Purdue University. "Most people recognize the need to cook foods to a temperature above 140 degrees in order to destroy most microorganisms that might be present, but they don't realize that any leftovers have to be cooled quickly so as not to allow any surviving bacteria to grow."

The U.S. Food and Drug Administration recommends that cooked food be cooled to the refrigeration temperature of 41 degrees Fahrenheit in less than four hours, but Linton says that's not as easy to accomplish as it sounds. He demonstrates this for his classes by preparing a big pot of chili and then measuring the amount of time it takes to cool to the recommended temperature.

"I cook the chili at 165 degrees and then let it cool to 140 degrees before placing the pot in a refrigerator that's set at 37 or 38 degrees," Linton says. "I then ask them how long they think it will take to cool down to 40 degrees. Rarely do I get a correct answer, which is between 20 and 24 hours."

Even people who have been cooking a long time may not realize the potential hazards of not cooling foods properly.

"How many people allow their Thanksgiving turkey to cool at room temperature for a couple hours before placing it in the fridge?" Linton asks. "If you've cooked it to the right temperature, you've killed all the bugs that are going to cause a problem right then. But bacteria thrives in that window between 140 and 40 degrees, and even a turkey carcass that's refrigerated immediately after it's carved is going to be in that temperature range a lot longer than four hours."

Consumers can speed up cooling time by using stainless steel containers that facilitate heat transfer; dividing food into smaller, shallower containers; slicing meat off the bone; stirring the food as it cools; or placing the container of food in an ice-water bath before putting it in the refrigerator.

CONTACT: Richard Linton, (765) 494-6481,

Compiled by Steve Tally, (765) 494-9809;

Purdue News Service: (765) 494-2096;


Purdue veterinary clinician Steve Thompson examines the wing feathers of a Moluccan cockatoo held by Mary Rakowski, a senior in veterinary medicine from Bremen, Ind., and assisted by second-year veterinary technician student Rebecca Cripe of South Bend, Ind. (Purdue News Service Photo by David Umberger)

A publication-quality photograph is available at the News Service Web site and at the ftp site. Photo ID: Thompson.commclinic

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