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

Author

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  • Harrison, Virden L.
  • Woods, W. Fred

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.

Suggested Citation

  • Harrison, Virden L. & Woods, W. Fred, 1972. "Farm and Nonfarm Investment in Commercial Beef Breeding Herds: Incentives and Consequences of the Tax Law," Miscellaneous Publications 324116, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersmp:324116
    DOI: 10.22004/ag.econ.324116
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    File URL: https://ageconsearch.umn.edu/record/324116/files/ERS-497.pdf
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    Citations

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    Cited by:

    1. Brake, John R. & Melichar, Emanuel, 1977. "Agricultural Finance and Capital Markets," A Survey of Agricultural Economics Literature, Volume 1: Traditional Fields of Agricultural Economics 1940s to 1970s,, Agricultural and Applied Economics Association.
    2. Krause, Kenneth R., 1991. "Cattle Feeding, 1962-89: Location and Feedlot Size," Agricultural Economic Reports 308149, United States Department of Agriculture, Economic Research Service.
    3. Lanier, Eleanor B., 1974. "Economics of Agriculture: Reports and Publications Issued or Sponsored by USDA's Economic Research Service, July 1971-June 1972," Miscellaneous Publications 321804, United States Department of Agriculture, Economic Research Service.
    4. Brake, John R. & Melichar, Emanuel, 1977. "PART VI. Agricultural Finance and Capital Markets," AAEA Monographs, Agricultural and Applied Economics Association, number 337218, january.

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