| A lot of people have been led to believe that investing is complicated. In reality, it can be much simpler than you think. No matter how sophisticated, most investors want the same thing--growth. Alpacas deliver just that!
Alpacas offer an outstanding choice as a livestock investment. Alpacas reproduce almost every year, and about one-half of their babies are females. When you retain the female offspring in your herd and they begin producing babies, your herd value goes up. This is what is known as "Alpaca Compounding."
Many breeders will sell all or some of the annual offspring for such reasons as recovering their initial cash flow, acreage, building limitations, and time. When we made the initial investment into alpacas we chose to sell all of our offspring until such time as the initial investment, or debt, was paid in full. We have been in this business since 1994 and have recovered all of our initial investment and now have the option of continuing to grow our herd or continue to sell the offspring.
Tax-deferred wealth building is another advantage to owning and investing in alpacas. As you retain the offspring and your herd grows, you are postponing paying income tax on the increasing value of your investment until such time as you begin selling the offspring. Some other type of investment that would be earning interest would be currently taxable and not depreciable, thereby offsetting the tax due on current income.
There are many potential tax advantages to owning alpacas; depreciation, capital gains treatment, and the benefit of offsetting your ordinary income from other sources with the expenses from your alpaca business.
If you choose to raise alpacas on your own farm, all the expenses attributable to your alpaca business can be written off against your income. That means you can write off such expenses as feed, fertilizer, veterinarian care, etc., and also depreciation of such items as breeding stock, barns, and fences.
If you choose to be less active in your ownership of alpacas and board your animals at a farm that provides boarding, you may still enjoy many of the tax advantages of raising them on your own farm. You can still depreciate breeding stock and expense the direct cost of maintaining the animals.
There are also depreciation benefits to owning alpacas. An alpaca can typically be written off, or depreciated, over five years if they are being kept as breeding stock. This is what is known as the straight-line method and it allows you to deduct one-fifth of the cost each year, except the first year, which allows for only six months of write-off.
There are also several accelerated methods of depreciation which allow you to write off a larger percentage of the cost of the animal early, up to $17,500 in the first year the alpaca is acquired.
There are other tax-saving strategies that can be used in conjunction with investing in alpacas. For example, you can exchange like to like alpacas and avoid the tax of a sale. An example of this would be an alpaca breeder who wants to diversify his bloodline. If he chooses to sell his alpacas and buy more, he would be required to pay tax on his gains. If, however, he chooses to exchange his alpacas for others, there would be no tax due.
In summary, these are just some of the tax advantages that apply to the investment of alpacas. Alpacas are not only an outstanding investment with excellent tax benefits, these wonderful animals are also 100% insurable.
(See your local tax consultant for specific details.) |
