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Inventory and taxes?
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Kooiker
Posted 1/21/2025 22:55 (#11067504 - in reply to #11066679)
Subject: RE: Inventory and taxes?



MiradaAcres - 1/21/2025 13:07

You mean interest free money. 

I'm not sure what you're trying to say here.




Farmers are the only group of people that get mad when they make money and have to pay taxes.  I have never heard a CEO say "No, I don't want a $1,000,000 raise because I will have to pay more taxes on it."  Likewise, it takes taxed income to purchase land.  There is nothing wrong with paying taxes; the trouble is most farmers focus on minimizing thier tax liability vs maximizing their tax brackets and then complain when they need cash to buy land because they squandered all the profits on depreciable assests and left nothing for investments.




I don't mind paying taxes but I don't want to pay more than I need to and I don't want to pay them before I need to pay them.       With cash based accounting you get to decide how much you pay and when you pay it (to an extent).   You can push income forward with prepays and deferred payment and you can push income rearwards with income averaging.         

As for squandering profits on depreciable assets, that sounds like a personal discipline problem.    I suppose for people that have a tendency to waste money, maybe accrual accounting is a good idea so they don't end up with a deferred tax liability that they don't have money to pay.     

You and everyone else can do what they want but I'll stand by my comment that its foolish to use accrual accounting if you have the option to do cash accounting.     

FWIW, that CEO that gets the $1M raise, likely runs a company that does NOT have the option of cash accounting.   But his personal income is reported on a cash basis.

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