2014springreguide

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South River Real Estate Mike Lowry, Broker/Owner • 970-209-4312 • 970-249-2662 Debra E. Kane, Associate Broker • Cell: 970-275-2791 Travis W. Wofford • Cell: 970-209-0321

INCREDIBLY BEAUTIFUL IRRIGATED LIVESTOCK RANCH

For more information on any of these properties, visit our website at www.soriver.com

GREAT LITTLE HORSE SET-UP

413 Acres • Cedaredge Delta County 413 contiguous acres; approximately 350 irrigated acres; set of tie and pipe working corrals; semi loading chute; well; 2 Orchard City water taps; year round live water out of Surface Creek making this the perfect investment for hay production, livestock grazing, calving, and hunting; excellent development potential due to the abundance of valuable priority irrigation water for converting to domestic water taps and the fact there are county roads or state highway frontage on three sides; 2,315 sq. ft., 2 bedroom, 3 bath home featuring a 26x30 family room with a gas fireplace, mud room, stand alone shower and jetted bath tub in the master bedroom, and a 30x40 attached oversized garage; home has lots of windows from which to enjoy the phenomenal unobstructed views which include not only the treasured snow capped mountains but the famous Grand Mesa and the plush hay fields and wildlife traversing the meadows; come take a look at this pristine property. M.L.S. #687734/#687739 Price: $2,975,000.00

CHARMING RANCHETTE IN COAL CREEK

17.11 Acres • Montrose County • Colorado

12 irrigated acres; 3,384 sq. ft. 5-bedroom, 4-bath home features an adobe fireplace in the office, southwest design picture window, wet bar; beautifully landscaped yard; large colored concrete tiered patio overlooking the valley floor and surrounding mountains plumbed for gas grill; separate building with hot tub; in addition to the 2-car attached garage, there is another garage which has electricity and foam insulation; 24x120 metal building containing a 24x40 shop area with electricity, 220 power, gas stove, fluorescent and flood lighting, 16x10 door with opener, 4 outside pipe rail pens and hay storage area; plus 4 additional outside pens located by the roping arena; 5 automatic frost free waterers; you must take a look at this captivating location in order to appreciate the country appeal. M.L.S. #662734/#662737 Price: $689,000.00

PRISTINE MOUNTAIN PROPERTY 590 Acres • Montrose Montrose County Magnificent mountain property; several expansive open irrigated parks; irrigation water; 4 ponds; 2 decreed springs; Pinion and Juniper trees; abundant wildlife; rustic cabin; county road traverses the entire length of the property; borders BLM on three sides; outstanding grazing and hunting.

M.L.S. #691023 Price: $720,000.00

4.71 Acres • Olathe Montrose County This wonderful, neat and clean ranchette features: 2 story, 2,000 sq. ft., 3 bedroom, 3 bath, handicap accessible home with tiered decking, beautiful landscaping, fruit trees; a 36x50 insulated shop with concrete floors, office, loft storage area, ceiling fans, electric heaters, 220 power outlets; attached to shop are two 16x50 steel beam leanto’s; a 50x70 barn with an insulated tack room, 4 panel pens, two 10x20 hay storage areas; corrals; loafing shed; and riding arena; approximately 2.5 irrigated acres; so if this sounds like something you have always dreamed about, come take a look. M.L.S. #672042 Price: $380,000.00 Price Reduction: $359,900.00

SECLUDED RANCH

45 Acres • Montrose Montrose County Plush hay meadows is located southeast of Montrose; 30 irrigated acres with ample irrigation water; good habitat for wintering cattle and for the wildlife; great horse setup featuring a 39x58.5 open hay shed and a 60.5x156 wood-sided barn with indoor arena, electricity, workshop, office and tack room with a swivel iron saddle rack; 1,606 sq. ft., 2-bedroom, 1-bath home with 2 pellet stoves, RO water system, tongue and groove paneling and ceiling; yard surrounding the home features large mature trees, rock water way, boulder accents and flowers; borders BLM on two sides; put this all together and this truly is the place you have dreamed about. M.L.S. #681014 Price: $650,000.00

VERSATILE PROPERTY 14.26 Acres • Olathe Montrose County Country setting affording privacy; approximately 13 irrigated acres; plenty of irrigation water; includes a side roll sprinkler; beautiful 1.5 story 1,964 sq. ft., 4-bedroom, 3-bath home with lots of wood work, custom made Birch kitchen cabinets, granite counter tops, hardwood flooring, gas fireplace, large patio, two-car attached garage with a guest bedroom and bath upstairs; 66x50 shop, with 2-12x14 doors, office, living quarters with appliances, 2-bathrooms, concrete floor, 220 electricity, in-floor heat, outside wash rack; wood-sided pump and storage building; 12x30 loafing shed with tack room; two separate fenced pastures; access immediately off a county road; small amount of river frontage; amazing landscaping; sound like a place you can enjoy life from, then it is waiting for you. M.L.S. #684200/#684209 Price: $649,000.00

18101 Woodgate Road, Montrose, CO 81403 email: mlowry@soriver.com

4 The Fence Post Spring RE Guide 2014

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Table of Contents Colorado Land Values ..........................................6 Nebraska Land Values .......................................10 Nebraska’s Need For Property Tax Reform .....13 Colorado Call for Repeal of Estate Tax ............16 Office at 501 8th Avenue, Greeley, Colorado. Mailing address: P.O. Box 1690, Greeley, Colorado, 80632. Telephone: (970) 686-5691. FAX: (970) 352-7164. Advertising Deadline: 5 p.m. Wednesday. Published every Monday. The Fence Post (USPS No. 547650; ISSN# 0274-7308) is published weekly for $55 per year by Greeley Publishing Co., at the offices of the Fence Post, P.O. Box 1690, Greeley, Colorado, 80632.

Postmaster: Send address changes to the Fence Post, P.O. Box 1690, Greeley, Colorado, 80632. Periodicals postage paid at Greeley, CO., and additional mailing offices. Subscriptions outside the continental U.S. $81/year. ŠCopyright Greeley Publishing Co., 1990. All rights reserved. Reproduction without permission of the publisher is prohibited. We advise anyone who submits material to the Fence Post that doing so constitutes a consent for the Fence Post to publish the material as it chooses, including but not limited to all print, electronic, and archival versions, without any further compensation to the author.

The Fence Post Spring RE Guide 2014 5

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Despite drops in commodity prices, Colorado land values not falling off

BY ERIC BROWN | THE FENCE POST

W

hile a number of Midwest states are starting to see farm land values level off and even drop some, the same can’t be said for Colorado.

A number of experts with a close eye on the local land market say that, while land isn’t seeing the historically sharp increases in value it saw in recent years, Colorado ag ground is still on an upswing.

“It’s definitely not dropping off,” said Jerry Lebsack with Premier Farm credit in Yuma, Colo., who noted that the past half-dozen sales of pivotirrigation ground he’s seen in his area were in the $8,500 to $10,000 per acre range. “I’d say we’re still seeing a slight increase.”

The same goes for Weld County, Colo., the state’s most ag-productive county.

Numbers showed that recently, in 2012, farmground under center-pivot irrigation in Weld sold for about $7,000 per acre — about a 45 percent increase from what it was in 2011. And, Tony Miller, vice president at Firt Farm Bank in Greeley, said he’s seeing farmground in the county now selling for more than that — going in the $8,500 to $9,000 per acre range.

“You’re starting to see some leveling off in other places, like the Midwest,” Miller said. “But not here.”

For some time, a number of agriculture economists, particularly those in the Midwest, have said that 2014 would be a turning point for land values, which have been increasing rapidly in recent years.

Among the factors that will affect land values, they’ve said, are increasing interest rates, tightening margins and lower commodity prices.

“If you run these numbers through a model, I’d say we’ll see 15 to 25 percent lower prices on land over the next three to five years, if these kinds of conditions prevail,” Chris Hurt with Purdue University said back in December during the Indiana-Illinois Farm and Outdoor Power Equipment Show.

That’s not the case in Colorado thus far.

Miller explained that Colorado’s rapid municipal growth on the Front range, the increasing value of water in Colorado and uptick in oil and gas activity has kept land values high in his neck of the woods.

And while corn prices have fallen from $8 per bushel in recent years to under $5 per bushel more recently, which has impacted land values in the Midwest, cattle prices and dairy prices are strong, which bodes well for Colorado — Greeley, for example, is home to JBS USA, one of the four-major meat packers in the nation, and also Leprino Foods operations, which is the largest mozzarella cheese processor in the world.

“We produce some commodities around here that are still doing well ... so people are optimistic around here,” Miller said.

Even if ag land values do begin to fall, as some economists have predicted, experts don’t fear a fallout. While some concerns linger about a potential ag-land bubble burst, most think any approaching drop in land prices is unlikely to be as sharp as in past decades.

Despite a 39 percent increase in the amount of debt held by U.S. farm businesses between 1992 and 2011, U.S. farms are now situated in a stable financial position, thanks to improving income and historically low interest rates, a pair of recent USDA farm income and ag management surveys showed.

USDA’s Farm Costs and Returns Survey and Agricultural Resource Management Survey provided the data for a recent summary of the farm sector’s financial situation and outlook, prepared by USDA agricultural economists Kevin Patrick and Jennifer Ifft.

The two economists say that while debt use and leverage varies widely, most farm businesses are better prepared to handle unexpected changes in farm income or interest rates than they were in the 1990s — hopefully poised to avoid any similar situations to the 1980s farm economy fallout. ❖

The Fence Post Spring RE Guide 2014 7

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1-800-889-7816 It’s only

natural to start them early.

Sprinkler & Flood Irrigated Farm

176.25 acres located North of Ft. Morgan, CO. Includes 2 irrigation wells and 2 center pivot sprinklers. Close to I-76 ~ great locale for commercial business or residence. $525K. Contact Monty Thomas for more information about the Riverview Farm.

80 Acre Hobby Farm w/Home Flood irrigated acreage comes with 3 irrigation wells in the Lost Creek system; planted to corn in 2013. Beautiful custom built brick ranch home, plus 3 exempted acres with second residence and metal shed. Great mountain views. Listed by Monty Thomas. $799,900.

6 4 6 5 5 7 (800) 2epost.com thefenc

8 The Fence Post Spring RE Guide 2014

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PROPERTIES FOR SALE: 5,160 +/- total acres contiguous dryland farm in NECO consisting of dryland, CRP, grass, state and private lease.

With good improvements. $3,700,000 2,293 +/- acres Ranch near Kim, CO. Great improvements, good fences and well watered. Currently run as a yearling operation w/ excellent hunting. $2,293,000

Delta County, CO - Exceptional Farm Ground & Home

160 +/- acres flood and pivot irrigated Sedgwick County, CO farm with JID water, excellent equipment, good location and lays well. $795,000 7.33 +/- acres with a beautiful 1 ½ story home, 30’ x 60’ shop, grain bin, and additional outbuildings, Great country home in Sedgwick County. $235,000 480 +/- acres pivot irrigated ground in Dundy County, NE Good equipment, 2 grain bins, diesel powered wells, good water. $3,000,000 Give us a call if you’re looking to Buy or Sell and check out our website for additional listings.

Cumming Realty LLP

Rick Kusel Broker Assoc.

108 W. 1St Julesburg, CO Visit our website @ 970-474-3773 www.cummingrealty.com 970-554-1762

80 acres with 60 shares of UVWUA irrigation water. 60+/- ac in cultivation & 20+/- ac in meadow with year-around water (great for horses or....). The classic, beautiful, well maintained country farm home was built in 1899, remodeled in 2008 & 2009. Huge front yard with amazing large trees provide great shade and give the home that comfortable country feel. Four bedrooms and one & a half bathrooms in this 2200 +/- sq. ft. home. 960 +/- sq. ft. barn, one car detached garage with shop space. Newer sprinkler system, metal roof, vinyl siding, 95% high efficiency furnace and much more. $695,000

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Ag land values remain steady in Nebraska

BY ROBYN SCHERER | KIOWA, COLO.

F

or the past several years, farm land prices in Nebraska have steadily risen.

However, agricultural land markets in Nebraska remained relatively steady in the last year, according to preliminary findings from the University of Nebraska-Lincoln.

Overall, the average statewide farmland value rose by about 5 percent, as of Feb. 1, to $3,195 per acre, said Jim Jansen, research analyst with UNL’s Department of Agricultural Economics, which conducts the Nebraska Farm Real Estate Market Developments survey annually.

According to the 2014 Nebraska Farm Real Estate Market Survey, “Surveyed 2014 cash rental rates for cropland, on average declined with lower commodity prices, while pasture and cow-calf pair rental rates significantly increased. This was due to higher beef cattle prices, the lingering effects of the drought and the conversion of some marginal land to crop production.”

Farmland values in recent years have increased sharply, finally slowing down this year. The overall increase of 25 percent in 2013 followed increases of 22 and 32 percent in the two previous years, leaving the 2013 all-land value more than double the value in early 2010.

Several recent studies by Farm Credit Services of America show the same data. The first study is a semi-annual update of their Benchmark Land Values study, in which the lender has tracked the values of 65 farms for more than three decades. The second report is a compilation and analysis of more than 3,500 agricultural real estate sales transactions – both auctions and private sales — during 2013.

“After years of a steady rise led by lower than average U.S. yields, strong domestic and international demand for commodities, low interest rates and solid profit margins, we’re seeing the rate of price increases leveling off for farmland in some areas we serve,” said Mark Jensen, senior vice president and chief risk officer for farmer-owned Farm Credit Services of America.

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“There’s evidence that farmland prices may be on a slight decline from record highs seen at the end of 2012 and for most of 2013,” he noted. “Based on our benchmark study, Nebraska benchmark farm value increases slowed to the lowest levels in several years, up just 0.7 percent.”

UNL survey reporters across the state reported percentage gains for all the farmland classes for the period from Feb. 1, 2013 to Feb. 1, 2014.

In the last year, the largest increase by land class occurred for non-tillable grazing land, at 7 percent.

Non-tillable grazing land includes pasture and rangeland that does not have the current potential to be converted into cropland for small grain or row crop production.

Record high livestock prices translated into strong increases seen throughout the state for pasture and rangeland. The increases in non-tillable grazing land varied greatly among the districts, with a low of 4 percent reported in the Northwest District to a high of 32 percent in the South District, but the Northeast, Central, East and Southeast districts all averaged around 15 percent.

Expectations among survey participants also indicated high future cattle prices to be a strong factor fueling the increase in non-tillable grazing land.

Increases in dryland cropland values also varied across the state depending upon the location and potential for irrigation. Generally, changes of less than 10 percent occurred in the eastern third of Nebraska for dryland cropland with or without irrigation potential. The Eastern District had a decline of 5 percent in the value of dryland cropland with no irrigation potential, but this should be noted as more of a negligible change given the strong increase in this district over the prior several years, Jansen said.

The western two-thirds of the state had the strongest increases in dryland cropland values, with increases averaging around 20 percent. Increases in the value of dryland cropland of the western two-thirds of Nebraska are comparable to those of the eastern third of Nebraska reported by survey participants during the past several years.

Trends observed for the value of tillable grazing land are comparable to those of dryland cropland for the western two-thirds and eastern third of Nebraska, Jansen said. The hayland class proves to be a critical component of forage production in the state for cattle producers. Increases in the value of hayland generally averaged around 10 percent across the districts in 2014, whereas in 2013 the increases ranged from 25 to 30 percent, spurred by the devastating effects of the 2012 drought. Future changes in the value of this land class likely will be tied to the value of forages and cattle production in Nebraska.

Observed changes in the value of gravity irrigated and center pivot irrigated cropland ranged from 2 percent decreases to almost 20 percent increases.

Weighting these ranges across the districts equated to an overall increase of about 4 percent for each of the two irrigation land classes.

The Fence Post Spring RE Guide 2014 11

For the prior two survey years, in 2012 and 2013, the land value averages had an annual increase of about 30 percent. The smaller increases in the value of irrigated cropland in 2014 suggests the market is holding steady given current expectations and commodity prices.

Surveyed 2014 cash rental rates for cropland on average declined with lower commodity prices while pasture and cow-calf pair rental rates significantly increased due to higher beef cattle prices, the lingering effects of the drought, and the conversion of some marginal land to crop production.

Lower anticipated grain prices in 2014 have led to lower average cash rental rates for dryland, gravity irrigated, and center pivot irrigated cropland as profit margins begin to tighten, Jansen said.

In general, rental rates have decreased from previous years. The survey stated, “Across these three cropland rental categories, cases exist where rental rates have increased, but for the majority of the districts the rental rates have declined from five to 15 percent from the highs of 2013. In 2012 and 2013, survey respondents commonly reported annual increases in rental rates of around ten percent for the different cropland classes.”

It continued, “Preliminary results from the land survey also indicate the majority of land rental contracts are fixed cash leases, with shares remaining the second most popular alternative in Nebraska. Cash leases with provisions allowing the base rent to flex around actual crop yields and prices (flexible cash leases), have low utilization rates according to survey participants.”

Even though the prices have steadied, demand remains. Land prices and demand for farmland continue to be strong, Jensen said, but buyer sentiment could be adjusting with decreased commodity prices that will reduce the record profit margins experienced the past few years.

“Even though the number of public land auctions in 2013 was down 25 to 30 percent compared to 2012, auctions were often well-attended with multiple bidders,” Jensen said. “Some sellers may have expected higher prices than the auction high bid. Local farmers continued to make most of the purchases.”

Jensen said FCSAmerica’s data suggest customers are positioned to weather a moderate downturn in land prices.

“Since 2008 FCSAmerica has used a risk management strategy that includes a cap per acre on the amount of money we’ll loan for land purchases.

We’ve been using a long-term sustainable value approach to projecting repayment and lending levels based on corn prices closer to $4.50 per bushel versus the prices of $7 or more that some farmers were receiving in 2012,” he noted. “Our customers understand the financial risks and volatility in the agriculture industry. Their balance sheets and working capital levels are generally in a position of strength, and they have put a significant amount of equity into land purchases.” ❖

12 The Fence Post Spring RE Guide 2014

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The Fence Post Spring RE Guide 2014 13

NEBRASKA AG LEADERS: High land values again show need for property tax reform STAFF REPORTS

S

teve Nelson, president of the Nebraska Farm Bureau Federation, made the following statement last week after new reports showed that statewide agricultural land valuations had doubled since 2009: “Yesterday the Nebraska Department of Revenue’s Property Assessment Division released the real property value percentage change by property type from 2013 to 2014. As expected, agricultural land valuations again increased, this time by 29.12 percent over the previous year.”

“This increase ensures the statewide valuation of agricultural land for tax purposes will have doubled since 2009 as our estimates suggest nearly a 120 percent increase in valuation since that time. Our estimates also suggest that due to the increase, the statewide property taxes paid by farm and ranch families on agricultural land will near $1 billion in 2015.”

“As we have pointed out on many occasions the unprecedented growth in valuation on agricultural land and the associated increases in property taxes are carried by farm and ranch families who make up less than three percent of our population, but pay more than 25 percent of the property taxes collected statewide.”

“While the Legislature placing more monies into the property tax credit program in the vein of property tax relief is appreciated, the fact remains that Nebraska farmers and ranchers pay the third highest property taxes in the U.S. and will continue to do so until something is done to address this issue.”

“Nebraska Farm Bureau will continue to advocate

for change to a tax system which fails to recognize that property is not the sole means of measuring wealth and unfairly relies on farmer’s and rancher’s primary production tool (land) as the basis for funding schools and local government.”

Nebraska Farmers Union President John Hansen has also spoke often of “much-needed” property tax relief for ag producers.

In a conversation with The Fence Post last month, Hansen explained how Sen. Al Davis’ bill to the Appropriations Committee, which provides $25 million of additional funds to local government subdivisions, had been progressing, and that should provide a substantial amount of property tax relief.

Although, “it’s not the size of property tax relief we wanted, but it sends a signal that we’re going to start trying to help local government subdivisions with tax dollars ... and more emphasis on sales tax and less on property.

“That movement has been encouraging.”

But he also noted, that “there were a couple different bills in Appropriations that got put at $45 million, and came from cash reserve fund dollars, to help for property tax relief ... that didn’t go. Where was the problem? It’s hard to know how many folks were against providing additional property tax relief and how many folks were more likely just opposed to raiding the cash reserve fund.”

“What we’ve said historically,” he continued, “is there needs to be more a structural and systemic fix to the property tax problem, so that we treat all land owners better, and reduce all land owners tax loads ... and we make sure we’re helping all ag folks across the state.” ❖

14 The Fence Post Spring RE Guide 2014

KJ RANCH

Agate, Elbert County, Colorado Contiguous 6,400+/- deeded acre ranch just 1 hour from Denver. Excellent access & well-maintained set of improvements including 3,500 sq. ft. home, outdoor arena, barn & corrals!

Price: $5,129,500

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TABLE MOUNTAIN RANCH

Wellington, Larimer County, Colorado

Extremely scenic 800+ contiguous deed acre ranch located 25 miles north of Fort Collins. Electricity available adjacent to property.

Price: $4,000,000

Contact Logan Schliinz at (970) 222-0584

Contact Logan Schliinz at (970) 222-0584

WAGER ACREAGE

LONE TREE CREEK RANCH Cheyenne, Laramie County, Wyoming

MULE CREEK RANCH

Garrett, Albany County, Wyoming Ecologically diverse & productive ranch with 9,936+ total acres: 6,463+ deeded, 2,000 State, 1,473 BLM lease acres. Excellent wildlife habitat for elk, deer, etc. Ample water & nice set of improvements.

Price: $6,400,000

Contact Cory Clark at (307) 334-2025 or Scott Leach at (307) 331-9095

BRADLEY RANCH

25+ deeded acres approximately four miles from Fort Collins.

Excellent development potential.

Within 2-1/2 hours of DIA and located almost halfway between Cheyenne & Laramie just off I-80.

Beautiful 700+ deeded acre ranch at foot of Saddle Back Mountain w/100+ acres sub-irrigated meadows. Lone Tree Creek travels through ranch for 1+ mile. 2 ponds. Totally remodeled 3,864 sq. ft., 4 BR, 3-1/2 bath home.

Wellington, Larimer County, Colorado Gorgeous 804+ acre property with beautiful views. Paved access to property line. 250+ pivot irrigated, 20+ flood– irrigated acres. One share North Poudre irrigation water. 3,000 sq. ft., 4 bedroom, 3 bath home, shop, barn, working corrals. 20 minutes N of Ft. Collins.

Contact Logan Schliinz at (970) 222-0584

Contact Cory Clark at (307) 334-2025 or Logan Schliinz at (970) 222-0584

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Casper, Natrona County, Wyoming 22 miles west of Casper are 7,109+ total acres consisting of 5,549+ deeded, 680+ State and 880+ BLM lease acres . 2 flowing wells, pipelines, windmill & reservoirs. Easy year-round access.

Craig, Moffat County, Colorado Well-balanced productive 1,300+ total acre ranch with 400+ deeded & 900+ State lease acres of which 257+ acres are pivot-irrigated.

Four Mile Creek runs through ranch. Very nice improvements.

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Price: $2,500,000

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VETTER RANCH

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1,276Âą contiguous deeded acres of rolling native grass pastures with views of the Rocky Mountains to the west within 1 hour of downtown Denver. Ample water from windmill & seasonal springs. No improvements.

Price: $1,020,872

Contact Logan Schliinz at (970) 222-0584

The Fence Post Spring RE Guide 2014 15

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Larger Harvest is the new generation in soil technology.

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16 The Fence Post Spring RE Guide 2014

Rep. Lee Terry, R-Neb.

www.thefencepost.com

Congressmen spend Tax Day calling for repeal of estate tax

BY ERIC BROWN | THE FENCE POST

S

ixty members of Congress spent Tax Day last week supporting the repeal of the estate tax — a tax, they say, is a major obstacle for family farms, and one that’s only caused more issues as ag property values have skyrocketed in recent years.

The dozens of congressmen — including four from Fence Post readership areas (three in Colorado and one in Nebraska) — wrote in the letter last week that “the tax punishes the hard work and savings of parents wishing to leave behind a better life for their children and it seriously affects family farms and family-owned Rep. Scott Tipton, R-Colo. businesses. This tax only accounts for around 1 percent of federal revenue and we believe it’s an unnecessary tax on America’s job creators.”

Cory Gardner, R-Colo., Scott Tipton, R-Colo., Doug Lamborn, R-Colo., and Lee Terry, R-Neb., were among those who signed the letter.

The estate tax issue has attracted plenty of attention in recent years.

Back in 2012, Gardner, Tipton, and Lamborn formally called for the repeal of the estate tax, also known as the “death tax.”

Around that time, a Bush-era estate tax exemption for property valued at just over $5 million was set to fall down to $1 million, and the estate tax rate of 35 percent Rep. Doug Lamborn, R-Colo. was set to skyrocket back up to 55 percent.

Although, as part of “fiscal cliff ” decisions in January 2013, lawmakers agreed to keep the federal estate tax exemption at $5 million, and set the maximum tax rate at 40 percent, which came as a relief for ag producers, for the time being.

But many ag producers, much like the members of Congress who signed the letter last week, don’t want an estate tax at all.

Some call the estate tax the No. 1 killer of family farms.

Given the rapid increases in farmland values in recent years, many farming and ranching families easily exceed the $5 million exemption.

In Colorado, Nebraska and elsewhere, Rep. Cory Gardner, R-Colo. irrigated farmland is valued at as much as

$10,000 per acre, meaning that 500 acres — much smaller than the average Colorado farm (881 acres) — could amount to $5 million in value by itself. Then there’s valuable farm equipment and other assets to be factored in.

While many farmers and ranchers are land-rich, many are also cash-poor, often spending much of their earnings on input costs — feed, fuel, labor — that can total up to hundreds of thousands of dollars each year.

Many worry that beneficiaries of farm assets that surpass the $5 million exemption could be forced to sell a portion of their inheritance, including some of their ground, just to have enough cash to pay the estate tax bill.

The full text of the letter written last week reads: “We commend for your efforts thus far in making comprehensive tax reform a reality.

Like you, we believe it is well past time to move to a tax code that is simpler, fairer, and flatter for everyone.

“One area that we would encourage you to continue considering is the issue of the Estate Tax, or so call “death” tax. As you are well aware, the death tax is set permanently at 40%. While we appreciate that your proposal continues the certainty of having a permanent set rate, we would encourage you to consider repealing this tax all together.

“The death tax places a significant burden on small business and farm as these operations are transferred to their family heirs. The tax punishes the hard work and savings of parents wishing to leave behind a better life for their children and it seriously affects family farms and family-owned businesses This tax only accounts for around 1% of federal revenue and we believe it’s an unnecessary tax on America’s job creators.

“Thank you for your consideration We applaud your hard work on this issue, and look forward to working with you and the Committee on enacting comprehensive tax reform. ❖

The Fence Post Spring RE Guide 2014 17

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hley Lashley Ad Land NELand Ad Cattleman NE AdCattleman NE MARCH Cattleman MARCH 2014.indd 2014.indd 1 1 1 Eand Cattleman MARCH 2014.indd 1MARCH NE Cattleman MARCH 2014.indd 1 2014.indd

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20 The Fence Post Spring RE Guide 2014

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Understanding economic depreciation for farms and ranches COURTESY OF CSU EXTENSION

DEPRECIATION METHODS

epreciation is defined as the annual reduction in value of a durable asset due to use, wear, age or obsolescence.

Depending on the asset, depreciation may result from a combination of any of these factors.

For an asset to be depreciable it must: 1) be owned, 2) have a useful life greater than one year, 3) have a finite and determinable life, and 4) have productive use in the business.

While real estate itself is not depreciable (nor is market livestock, crop inventories or supplies), buildings, vehicles, machinery, equipment, fences and other land improvements and breeding livestock are depreciable.

Depreciation appears on an accrual income statement (the list of revenues and expenses that provides an estimate of annual profit) as a non-cash expense.

Depreciation represents the annual portion of the asset’s value used up by the business. As a reduction in revenue, depreciation also contributes financially to the asset’s replacement cost. Depreciation is not accounted for on cash income statements or cash flow budgets because it is a non-cash item (meaning depreciation does not result in actual cash leaving the business).

Depreciation is also used to calculate an asset’s depreciated value or book value for the cost-basis balance sheet. A balance sheet contains estimated values for assets and liabilities at a particular point in time (typically at year’s end). For those assets that are depreciable, book value — original cost less accumulated depreciation — is the remaining cost-basis of the asset.

Depreciation calculations utilize the asset’s original cost (i.e., basis), and require business managers to estimate salvage value and useful life. The cost of an asset is generally the purchase price plus shipping, installation, and any other associated expense required prior to use.

Occasionally, an asset will have an adjusted basis to account for increases or decreases in value that have occurred between the time the asset was purchased and when it was placed into service.

For assets without a purchase price, fair market value is used as the asset’s beginning basis.

There exist several common methods for calculating economic depreciation. The selection of a particular method depends on the asset to be depreciated.

Managers should also be aware that depreciating an asset for tax purposes is different than calculating depreciation for an income statement or balance sheet.

Although calculating depreciation is a relatively simple procedure, the process is complicated by the fact that assets depreciate at different rates depending on use, conditions, and other factors. Managers should be mindful that the purpose of depreciation is to accurately reflect an asset’s decline in value over time. As a result, managers should choose the depreciation method that most accurately reflects this decline for each asset in productive use. Three common methods for computing depreciation are straight-line, declining balance, and sum-of-year’s digits.

D

STRAIGHT LINE The straight-line method produces a constant depreciation value for each year.

The formula for straight-line is: Annual Depreciation = (Original Cost – Salvage Value) / Useful Life To illustrate, assume a farm implement has a purchase price of $60,000, an economic life of 10 years, and a salvage value of $10,000.

In this example, the annual depreciation for this asset is: ($60,000 - $10,000) / 10 = $5,000 Using the straight-line method, the asset depreciates $5,000 annually resulting in a salvage value of $10,000 when fully depreciated at the end of year 10. (Note that with depreciable assets, original cost minus accumulated depreciation equals book value in any given year.)

DECLINING BALANCE Declining balance is an accelerated method of depreciation used for assets that depreciate more rapidly in early years and less rapidly as they age.

The formula for declining balance is: Annual Depreciation = Book Value of Asset at Beginning of Year x R (where R is a constant percentage rate) Declining balance uses the percent reduction in value from the straight-line method as R. Using the farm implement example provided earlier, a projected useful life of 10 years corresponds to a 10% reduction in annual value (i.e., R = 10%).

Therefore, annual depreciation for the implement using declining balance is:

www.thefencepost.com

Year 1 = $6,000 ($60,000 x 10%) Year 2 = $5,400 ($54,000 x 10%) Year 3 = $4,860 ($48,600 x 10%) Year 4 = $4,374 ($43,740 x 10%) Year 5 = $3,937 ($39,366 x 10%) Year 6 = $3,543 ($35,433 x 10%) Year 7 = $3,189 ($31,889 x 10%) Year 8 = $2,870 ($28,700 x 10%) Year 9 = $2,583 ($25,830 x 10%) Year 10 = $2,325 ($23,247 x 10%) If economic life should end before salvage value is reached, managers should add any unused depreciation to the accumulated depreciation in the final year. An alternative would be to lengthen the asset’s useful life.

Double declining balance (a common modification of declining balance) necessitates an R double that of the percent reduction from the straight-line method. With the double declining balance method, R is now 20% (assuming an asset with a useful life of 10 years). The farm implement’s annual depreciation using double declining balance is: Year 1 = $12,000 ($60,000 x 20%) Year 2 = $9,600 ($48,000 x 20%) Year 3 = $7,680 ($38,400 x 20%) Year 4 = $6,144 ($30,720 x 20%) Year 5 = $4,915 ($24,576 x 20%) Year 6 = $3,932 ($19,661 x 20%) Year 7 = $3,146 ($15,729 x 20%) Year 8 = $2,517 ($12,583 x 20%) Frequently, using the double declining balance method results in the asset fully depreciating before its useful life ends (in this example, the depreciated value is $10,066 at the end of Year 8). With declining balance the manager must select an R of 100%, 150%, or 200% of the straightline annual reduction value.

SUM-OF-YEAR’S DIGITS Like declining balance, sum-of-year’s digits is an accelerated depreciation method.

The formula for sum-of-year’s digits is: Annual Depreciation = (Original Cost – Salvage Value) x RL/SOYD (where RL is remaining years of life and SOYD is sum of the year’s digits) An asset with a useful life of 10 years has SOYD = 55 (10+9+8+ . . . +1).

To illustrate this approach, assume an asset has a 10-year useful life, a purchase price of $10,000 and a salvage value of $2,000.

The sum-of-year’s digits method yields depreciation amounts for years 1-3 of: Year 1 = $1,454.54 ($10,000 - $2,000) x 10/55 Year 2 = $1,309.09 ($10,000 - $2,000 x 9/55 Year 3 = $1,163.63 ($10,000 - $2,000) x 8/55 This process will continue through Year 10 at which point the asset will be fully depreciated and book value will equal salvage value.

The Fence Post Spring RE Guide 2014 21

COMPARISON OF THREE METHODS

Because the straight-line method produces a constant depreciation value for each year, this method is appropriate for assets that are used an equal amount (approximately) in each year of useful life.

The declining balance method depreciates the asset at an accelerated rate rather than spreading the cost evenly over its useful life.

As a result, declining balance is the appropriate method for assets used more in the early years of life and less as they age, or for assets that wear out relatively quickly.

Like the declining balance method, sum-of-year’s digits results in relatively large depreciation charges in early years and smaller charges as the asset ages.

INCOME TAX DEPRECIATION Income tax depreciation and economic depreciation have different purposes and can result in very different annual depreciation values for the same asset.

The purpose of income tax depreciation is to reduce taxable income by writing-off the asset’s cost over a proscribed recovery period. Income tax depreciation is calculated in ways that are similar, but not identical to those used for economic depreciation.

From a financial standpoint, income tax depreciation is used to maximize after-tax income.

While taxpayers do have some choice regarding the depreciation method they may use for income tax purposes, the IRS stipulates methods available and potential recovery periods depending on asset class.

Farms and ranches with depreciable assets use the Modified Accelerated Cost Recovery System (MACRS) for assets placed in service after 1986. MACRS groups assets into nine property classes: 3-year property, 5-year property, 7-year property, 10-year property, 15-year property, 20-year property, 25-year property, residential rental property, and nonresidential real property.

These property classes determine recovery periods. For example, most agricultural machinery and equipment will be in the 7-year class and have a 7-year recovery period.

Purchased dairy and beef cattle are in the 5-year class; while swine and horses are in the 3-year and 7-year classes respectively.

SUMMARY Economic depreciation should reflect an asset’s reduction in value over time from use, age, and other factors.

Economic depreciation appears as an expense on the accrual income statement and is used to estimate asset value on the cost-basis balance sheet.

As shown in this document, different depreciation methods are available. The method selected should be based on the characteristics of the asset and how the asset is used.

It is recommended that the farm business manager consult with a tax professional before selecting a depreciation method for income tax purposes, and carefully study the projected income statement and balance sheet impacts of any economic depreciation method prior to adopting it. ❖

22 The Fence Post Spring RE Guide 2014

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C o m p e l l i ng H u m a n Interest Stories

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FOR SALE Irrigated Land

80 ACRES -Excellent water rights, includes home, barn and corrals, Merino-Hillrose area, half planted to alfalfa. REDUCED. House and improvements may be separated 320 ACRES CRP expires 2023, So of Lindon, CO $384,000 455 ACRES CRP & GRASS - with 371.5 acres CRP, expires 2020 83.5 acres grass, S of Akron, CO $295,750 640 ACRES GRASS & FARM - 275 acres expired CRP ready to farm, balance grass. Lindon, CO area. $360,900 5 ACRES – 6 bdr home, 4 bath, 2 buildings, NICE. $285,000.

Akron, CO UNDER CONTRACT 6 ACRES – 3 bdr, 2 bath, 1 building, $130,000. Akron, CO 5 ACRES – 3 brd, 2 ¾ bath basement, 1 building, $230,000, Akron, CO NEW Restaurant/Lounge in northeast Colorado. Existing business and clientele. Excellent cash flow. Includes everything! $120,000 NEW 160 ACRES – CRP 8 years left, NE Akron $204,000 NEW 160 ACRES – Farmland, east of Akron, CO. Cash lease NEW 160 ACRES – Farmland. Cash lease. South of Akron, CO NEW 160 ACRES – Grassland. North of Otis, CO $80,000 NEW 160 ACRES – Farmland SW of Akron, CO $216,000 NEW 371 ACRES – CRP & farmland, Lindon, CO $408,000 SEVERAL OTHER LISTINGS FOR SALE

GOODMAN REALTY CO., INC. 142 Main Ave. P.O. Box 402 Akron, CO 80720

Lawn Native Pasture Wildflowers Reclamation Small Grains Annual Forages

101 East 4th St. Road, Greeley CO 970.356.4710

www.sharpseed.com

970-345-2203 www.goodmanrealtyco.com

4,600 +/- Acres Kit Carson County Grassland & Dry Land For Sale The Mills Ranch is a 2,860-Acre Farm that consists of Native Grass, CREP, Dry land & improvements. The improvements include corrals, a 92’ x 42’ Cleary Building, a 27’ x 132’ pole barn, 17’ x 63’ pole barn and a 62’ x 50’ shop building. The ownerstocking rate is 15 acres/ pair grazing season. 50% owned minerals will pass with surface. $2,649,000 The Koeller Ranch adjoints the Mills Property on the south edge; this ranch contains irrigated ground, dry land and grassland with several outbuilding and established windbreaks. 100% minerals pass with surface. $1,625,000 (Scott White, listing agent.)

Come look @ one ranch or both!

Virgil George Broker/Owner 1510 Rose Avenue Burlington, CO 80807 Phone: 719-346-5420 Mobile: 719-349-1966 Fax: 719-346-5186 www.rxl.co email: rxl@centurytel.net

FARM & RANCH HALF SECTION TODD CO, SD

In South Central SD, 320+/- acres of Dry land, certified organic, farm ground.

New seed alfalfa, 1 electric well & 1 windmill.

SHERIDAN COUNTY SECTION

Located in NE Sheridan County, 640+/- acres including 179+/- acres of irrigated ground, 300+/- acres of grass pasture 120+/- acres of dryland farm ground, & 40+/acres with improvements & well established shelter belt. This property has good access, a great location & productive ground. Option on purchase: All 640+/- with improvements or minus 40+/- acres of Improvements.

CHERRY COUNTY GRASS

2461+/- acres. An Excellent Summer Unit, located just 8 miles from Valentine, NE, with good access! 5 cross-fenced pastures with excellent water, piped water, windmills & some tire tanks. Two natural springs on the edge of the property have been fenced off for wildlife habitat. There are a nice set of basic improvements on the north edge of the property.

TODD COUNTY SD QUARTER

Todd County SD, Quarter Section of sub-irrigated grass pasture suitable for hay ground. Live water from a creek on the north side of the property, good access, excellent grass cover, new fence on the west edge.

We are a locally owned & nationally known Independent Company, with the largest volume of sales, in the region, for both large & small ranches. We have proven to be highly successful in nationally & locally Advertised Sales, Auctions, and Confidential Sales. We currently have several qualified buyers looking for 100 cow to 1200 cow ranches. To learn more about us, our successful marketing and the professional confidential service we offer, stop in anytime!

Visit our website for details of all our listings: www.weberco.biz

WEBER & COMPANY REAL ESTATE 906 W Hwy. 20 ~ Valentine, NE ~ 402-376-1216 Rick Weber, Broker ~ 402-389-1406

26 The Fence Post Spring RE Guide 2014

View Our Listings at:

www.thefencepost.com

www.agpros.com

3050 67th Ave, Greeley, CO 80634 131 S. Maine Suite 202, Fallon, NV 89406

NEW LISTING FEEDLOT LOGAN COUNTY, CO: 15,000 head capacity situated on 320 acres near Fleming, CO. Improvements include 150,000 bushel grain storage, 150’x175 shop and an office. The yard is in very good condition with excellent drainage. 12,000’ of bunk. $2,200,000 550 HEAD DAIRY ON 70 ACRES. Excellent Front Range location. Very nice owners home, several other improvements including one home and several shops. Close to Leprino. $1,950,000 DAIRY LARIMER COUNTY, CO: Nice 750 Head Capacity Dairy on 40 Acres +/-. Double 14 Herringbone Swing Parlor. Two 20,808 sq ft Free Stall Barns with a Capacity of 800 Head with 800 Lockups. $1,400,000 NEW PRICE $999,000 DAIRY WELD COUNTY, CO: Retired dairy w/a Dbl 8 Herringbone Parlor. This farm consists of 155 +/- acres, 120 +/- of which are irrigated w/7.5 Shares of the New Brantner Extension Ditch Co. Improvements consist of 2 homes, 240 freestall beds, 3 calf barns w/a capacity of 200 head & a 7 bay commodity barn. This dairy is in an excellent feed area $4,300,000 DAIRY WELD COUNTY, CO: 700 head dairy on 180 +/- acres Dbl 10 Parallel w/newer BouMatic equipment & auto take offs. Parlor was remodeled in ‘02. 2-6,000 gal. milk tanks, one new in 2012. Very nice vet

Washington County NEW PRICE 149 acres +/- located 6 miles northeast of Hillrose. 140.8 FSA cropland acres irrigated with 16 shares of the Lower Platte and Beaver, one irrigation well augmented through the Hillrose Irrigation District. Possession available this spring NEW PRICE $953,600 MAKE AN OFFER

Weld County NEW LISTING 118 +/- acres located along the East Interstate 25 Frontage Road north of Hwy 52. Water and sewer available. Excellent retail/commercial opportunity. $3,600,000 117 acres +/- located on Colorado Blvd and Erie Parkway.

This property is located in an industrial area and would be ideal for a change of zone to industrial. $1,850,000 157.4 acres in CRP east of Wellington. Power and phone are at the site.

This would be an excellent location for a new home with excellent views. CRP contract through 2019. $275,000

building, 5 mobile homes & an owner’s home. 3 Coffin wells, two stockwells & a ¾” water tap. $2,600,000

138 +/- total acres of which 100 +/- acres are irrigated with South Platte

FEEDLOT WELD COUNTY, CO: 750 +/- Acres, 500 +-/ acres of which are irrigated by 5 center pivot sprinklers.

River frontage. Only minutes south of Greeley. Excellent hunting property.

10,000 head permit, dust control system, & two homes.$5,950,000

$1,100,000

FEEDLOT PIERCE, CO: 283 acres, 2¼ shares Water Supply & Storage, 10 irrigation wells, 7 tower Zimmatic pivot.

77 acres +/- located south of Kersey. 60 acres +/- pivot irrigated with a 2010

Dirt work is completed & a permit is in place for a 24,000 head feedyard. Would make an excellent heifer facility.

Reinke & a 2005 Zimmatic pivot. 4,200 sq ft home with several outbuildings

$2,500,000

including 40x60 heated shop. Excellent location. Call Ryan. $850,000

FEEDLOT MORGAN COUNTY, CO: 160 +/- total acres of which 60 +/- acres are irrigated. 10,000 head capacity

55 +/- Irrigated Acres southwest of Mead. Water rights include 24 Units of

w/lodge pole fencing, concrete bunks w/ pipe & cable neck rail. There is a dust control system in place. Improve-

CBT, 1.5 Shares of Highland & 6 Shares of MacIntosh. ¼ mile south of Hwy

ments include a large shop, indoor working facility, mobile home and a residence $1,650,000.

66 & 2 miles west of I-25. New Price $1,400,000

SOLD SOLD

SOLD

AGPROfessionals is a full-service agricultural development company that provides services for the agriculture industry across the US, with offices located in Colorado and Nevada.

Contact us at 970-535-9318 for more information on our services: √ Consulting √ Planning & Gov’t Relations √ Engineering & Design √ Permits & Entitlements (Licensed in CO, CA, NV, OK & OR) √ Legal / Legislative √ Agronomic & Environmental √ Financial Services √ Real Estate √ On Point™ Monitoring Systems (Licensed in CO, KS, NE, WY, NM & MT) √ Surveying & Geotechnical

“Professional problem-solvers achieving clients’ goals and advocating their success”

Go to www.agpros.com and sign up for our email updates.

Ryan Hostetler, Broker (303) 883-7080 Cell Olivia Cain, Associate Broker (720) 684-7220

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Ridgeway 1,708 sq ft

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MATERIALS: 2x6 construction, Pella windows, Moen faucets, R-23 spider fiber blown insulation and R-49 attic insulation are STANDARD. FASTER: While your new home is being built in our facility, site work such as excavating and pouring the foundation as well as setting up all the utilities can be completed.

Norton 2,035 sq ft

CHOICES: Custom build or choose from over 85 plans.

18 standard cabinet choices & 70 cabinet options are just the beginning. FREE 116 page catalog. Digital catalog is available on-line www.wardcraft.com EXPERIENCE: Over 5,250 homes built in 42 years.

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1-888-927-3272 www.wardcraft.com

Sales office in Greeley, CO 1230 E 9th Minden, NE • 614 Maple Clay Center, KS

Springfield II 2,136 sq ft

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Brighton III 2,200 sq ft

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