Farm and Nonfarm Investment in Commercial Beef Breeding Herds: Incentives and Consequences of the Tax Law

Virden L. Harrison and W. Fred Woods

No 324116, Miscellaneous Publications from United States Department of Agriculture, Economic Research Service

Abstract: This report examines the incentives and consequences of investment by farmers and nonfarmers in commercial beef breeding herds. It investigates the profitability of investment in beef cow herds with and without the special tax provisions of capital gains, net operating loss carryover, income averaging, and offsetting nonfarm incomes with farm losses. A computer simulator was used to budget the operations over a 15-year period using several levels of product and input prices. Results indicated that there is no economic incentive for nonfarm investments in commercial beef cow herds through management companies without the special provisions of capital gains and offsetting nonfarm income with farm losses. Even with current provisions of the tax law, nonfarm investment in beef cow herds is not profitable unless the investor is at or above the 50 percent tax bracket. Implications for various sectors of society as a result of nonfarm investment in beef breeding herds are discussed.

Keywords: Agricultural Finance; Demand and Price Analysis; Financial Economics; Livestock Production/Industries; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 31
Date: 1972-04
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:uersmp:324116

DOI: 10.22004/ag.econ.324116

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