# IRS and bees/bee products as livestock



## Cascade Hunter (Sep 22, 2013)

Anyone know what the ruling is on this? Does the IRS consider bees as livestock? (That is filing from business to farmer.) I find no clear ruling on this on their website.


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## Saltybee (Feb 9, 2012)

Prior threads generally favor schedule F over C with a few pollinators going for treatment as a rental of hives. (with a rental contract)


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## sqkcrk (Dec 10, 2005)

Cascade Hunter said:


> Anyone know what the ruling is on this? Does the IRS consider bees as livestock? (That is filing from business to farmer.) I find no clear ruling on this on their website.


A person who files a Schedule F can claim an expense when bees are purchased, queens or packages. But claiming a loss when those same bees die is not something one can do. Whether they are livestock or not, I don't know. I claim Queens Purchased as an expense.


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## Cascade Hunter (Sep 22, 2013)

Looks like schedule F is a GO. Thank you Karina.


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## snl (Nov 20, 2009)

You file schedule F....


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## bluegrass (Aug 30, 2006)

I file Schedule F. You may file a schedule A (hobby income) if you can show that you don't do it with intention to make a profit.


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## Daniel Y (Sep 12, 2011)

sqkcrk said:


> A person who files a Schedule F can claim an expense when bees are purchased, queens or packages. But claiming a loss when those same bees die is not something one can do. Whether they are livestock or not, I don't know. I claim Queens Purchased as an expense.


Just as general information. Bees are considered an investment and any sale of them considered a return on investment. Things such as treatments, sugar or pollen sub to feed even gas would be expenses. The way I look at it anything I spend money on that I cannot resell or I will use up is an expense. The bees themselves are and investment and the equipment weather I intend to sell it use it to get bees sold or keep it from myself and possible sell it later do to upgrade. down grade or simply change in management methods I consider costs.

Investment is intended to increase in value. Expenses i consider those things that will be used up completely and Costs are those things I consider equipment so I can get the work done. A vehicle for example is both a cost and an expense. the cost is the purchase price of the vehicle expense is the gas, maintenance, insurance and registration. They are the money that must be paid to get to the return on investment.


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## Michael Palmer (Dec 29, 2006)

One benefit of schedule F, if you make more than half your income from farming…If you file by March 1, you don't have to pay quarterly estimated tax.


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## Acebird (Mar 17, 2011)

:scratch: I thought quarterly vs. annually was based on how much you made or owed the Government.


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## sqkcrk (Dec 10, 2005)

Daniel Y said:


> A vehicle for example is both a cost and an expense. the cost is the purchase price of the vehicle expense is the gas, maintenance, insurance and registration.


So DanielY, are you claiming both the expense of the vehicle and the expense of the fuel, maintenance and registration? Seems like double or triple dipping to me.


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## Rader Sidetrack (Nov 30, 2011)

As I read it, there _are _special rules for 'qualified farmers' regarding estimated tax payments.


> Special Rules for Qualified Farmers
> The following special estimated tax rules apply if you are a [HIGHLIGHT] qualified farmer[/HIGHLIGHT] for 2013.
> You do not have to pay estimated tax if you file your 2013 tax return and pay all the tax due by March 3, 2014.
> 
> ...





> An individual is a [HIGHLIGHT]qualified farmer [/HIGHLIGHT]for 2013 if at least two-thirds of his or her gross income from all sources for 2012 or 2013 was from farming.
> 
> 
> copied from Publication 225 'Farmer's Tax Guide' Page 85 Chapter 15 Estimated Tax
> http://www.irs.gov/pub/irs-pdf/p225.pdf




As they always say, 'consult a qualified tax professional'  .... March 3 is a Monday in 2014. I would imagine that cutoff date may shift slightly in other years.


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## sqkcrk (Dec 10, 2005)

And today is the 9th.


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## snl (Nov 20, 2009)

sqkcrk said:


> So DanielY, are you claiming both the expense of the vehicle and the expense of the fuel, maintenance and registration? Seems like double or triple dipping to me.


For tax purposes, you capitalize and depreciate the cost of the vehicle (which includes registration) and expense the fuel, maintenance & insurance...


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## sqkcrk (Dec 10, 2005)

The fuel, maintenance and registration are claimed in one of two ways, mileage or actual receipts. Seemed like Daniel wanted to claim both ways.


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## Saltybee (Feb 9, 2012)

snl said:


> For tax purposes, you capitalize and depreciate the cost of the vehicle (which includes registration) and expense the fuel, maintenance & insurance...


I would place the first registration on the basis side because it was before the vehicle was first placed in service, after that it is a yearly expense.

Which form you should use is dependent on how you are conducting your business. Buy bees in the South, truck them north and sell them; is not farming. Doing it over and over and it is a business of buying and selling, subject to self employment tax. Do it rarely and it is probably just a gain on investment. Buy a package and sell a hive, now you are farming.

Simple system we have.


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## Cascade Hunter (Sep 22, 2013)

If I haven't learned anything, I've learned that IRS Pub 225 needs to be simplified. What a frigin' mess!


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## Bmango (Jul 17, 2013)

You can consider it or claim it anyway you want, but if you get audited the IRS may consider it very differently."An investment?" is a stretch.


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## Saltybee (Feb 9, 2012)

Bmango said:


> You can consider it or claim it anyway you want, but if you get audited the IRS may consider it very differently."An investment?" is a stretch.


That depends on many things. If that was the only activity, probably safe. Blended in with other beekeeping activities; unsafe.


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## snl (Nov 20, 2009)

Saltybee said:


> I would place the first registration on the basis side because it was before the vehicle was first placed in service, after that it is a yearly expense.


Totally agree........


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## Saltybee (Feb 9, 2012)

In real life, I'm cheap enough that I would make sure I placed it in service on the temporary plate.


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## Michael Palmer (Dec 29, 2006)

Acebird said:


> :scratch: I thought quarterly vs. annually was based on how much you made or owed the Government.


No. If you're self employed you file quarterly. If you're agriculture and file schedule F and more than half of your income is from farming you don't have to file quarterly. Many farmers profit is at the end of the year.


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## Acebird (Mar 17, 2011)

Michael Palmer said:


> No. If you're self employed you file quarterly.


My accountant said you have to file quarterly for the first year until you establish what your income will be. I think the number was less than three grand owed to the govey means they will put you on annual filing. Now it could be that my wife had income and that made a difference.

Wait a minute, I might be confusing sale tax to NY.


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## bluegrass (Aug 30, 2006)

I file annually every year. When you have alternative income it doesn't make a difference. I over pay at my regular job so I end up owing nothing on money earned beekeeping.


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## Saltybee (Feb 9, 2012)

You need to file 100% of last prior year's tax or 80% of tax actually owed for the year to avoid penalty when filing quarterly estimated tax.


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## Daniel Y (Sep 12, 2011)

Bmango said:


> "An investment?" is a stretch.


I suppose I will take the University of Florida word for it. From a publication they printed in 2005.

Selling bees and queens or equipment for one reason or another that normally
would be used in an operation is not income, but is considered a reduction in *investment* or fixed costs.

Hive *investment* is depreciable and
the interest on the *investment* is calculated the same
as for the building.

The following fixed costs are analyzed in this
section. They are: building investment, land
investment, bee investment, beehive *investment*, fence
investment and machinery investment.


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## Saltybee (Feb 9, 2012)

Daniel Y said:


> I suppose I will take the University of Florida word for it. From a publication they printed in 2005.
> 
> Selling bees and queens or equipment for one reason or another that normally
> would be used in an operation is not income, but is considered a reduction in *investment* or fixed costs.


 "that normally would be used in an operation is not income," That is true, and that is why it depends on what you are doing.

Entirely different matter if you buy low and sell high without it becoming the normal course of your trade or business. Ship packages from South and sell in the North. Only activity for the year, probably safe as return on investment.

Simplest example is real estate broker; buy a building and sell it, it is a capital gain. Buy 3 in a year and sell them it is an ordinary activity of your occupation and you had better report it as ordinary income. Simple isn't it. Yeah right.


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## Hartz (Sep 4, 2010)

Use which ever schedule fits your business the best. The Schedule F is better suited for the production of honey or hive products while the Schedule C is better suited for the retail of the product. Like M.P said, the biggest difference is your percentage of income from farming. If you qualify, not only do you not have to pay estimated quarterlies, you also have the option to average your income over the last 3 years.
The taxes are all figured the same so even if questioned by the IRS, the most they would do is tell you to use a different schedule.


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## sqkcrk (Dec 10, 2005)

How does that income averaging work? Say, if you had 2 years of Profit and one of loss. And the other way, 2 years of Loss and one of Profit. How does one do that and when does one decide to do so?


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## Angler (May 23, 2013)

To my knowledge, you would want to use Schedule F as if you are running a Farm! The IRS would probably not look upon you too nicely if you tried to include this income as ordinary income not subject to SE tax or capital gain income. A good accountant can inform you how to form an entity and escape the SE tax altogether, a company with 2+ employees on payroll! The portion of income derived from "renting your hive out" I would report on Sch E as doing so should be most tax advantageous by automatically excluding this portion of income from SE taxes. If you buy a hive or bees you are entitled to depreciation as the same with all fixed assets or purchased livestock. The reproduction of your livestock, new calfs, colonies etc, get no depreciation. Bee hives and bee colonies should be depreciated separately unless purchased together, in which case I would use the longer of the two depreciable lives.

My hats off to Sidetrack and Mr. Palmer for your interesting bits on how to not be liable for quarterly payments by deriving a certain percentage of farm income from an operation! The tax game is half knowing what taxes your subject to, but almost equally half is knowing how to mitigate and plan around them.

You know Uncle Sam gives you the opportunity to file your taxes any way you choose, it is ultimately your decision!


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## Saltybee (Feb 9, 2012)

Sqkcrk, Income averaging is gone for most of us. Check out instructions for schedule J on the IRS site. Been a long time since I looked hard at Schedule F details.
Trading payroll tax for SE tax is not a big gain when you are paying both sides anyway. For the right person with the right accountant I do not doubt that it can be favorable.
The original question was what do you use? That answer is always; depends on what you are doing, how you are doing it and even what else you are doing. 
Is it reasonable? Does it describe your business? Best for you is perfectly fine. Never get caught trying camouflage. They really do not like that. 
Nice post Angler.


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## sqkcrk (Dec 10, 2005)

Angler said:


> If you buy a hive or bees you are entitled to depreciation as the same with all fixed assets or purchased livestock. Bee hives and bee colonies should be depreciated separately unless purchased together, in which case I would use the longer of the two depreciable lives.


So how fast do you depreciate colonies? Isn't depreciation done w/ things that have more than one year life span/useful life? Such as equipment, buildings, vehicles?

Queens and nucs and packages would be expenses one would claim under Expenses on one's Schedule F, no?


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## jim lyon (Feb 19, 2006)

sqkcrk said:


> Queens and nucs and packages would be expenses one would claim under Expenses on one's Schedule F, no?


Agreed. Been a few years since we have had that expense but we always referred to them as replacement bees and never had a problem getting that expense written off in one year and we have had some pretty sharp CPA's prepare our returns. Bees on comb or new boxes would be a bit of a reach, though.


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## Hartz (Sep 4, 2010)

sqkcrk said:


> How does that income averaging work? Say, if you had 2 years of Profit and one of loss. And the other way, 2 years of Loss and one of Profit. How does one do that and when does one decide to do so?


Sqkcrk: Income averaging is just that. You basically average your income back over the last 3 years using a Schedule J. This helps keep you out of a high tax bracket if you have an exceptional year.
You must be a sole-proprietorship...S Corps, Partnerships, Corps cannot income average
As far as saving SE tax, rental income or dividends from S Corps are basically the only way.
To escape SE tax, you would have to own the bee equipment and then "rent" that equipment to another business entity; (you can not rent to yourself- deemed "self-rental") such as an S Corp even if you own the whole S Corp.
It is really pretty complicated but this is the short version.
Check out the Schedule J and Instructions @ www.irs.gov


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## Saltybee (Feb 9, 2012)

sqkcrk said:


> Queens and nucs and packages would be expenses one would claim under Expenses on one's Schedule F, no?


To me this is when the reasonable comes in; 25 nucs/packages into 90 or 100 hives is a yearly expense. 250 nucs/packages into a 100 hives is not a reasonable yearly expense, that is depreciation category.

There was a thread a bit ago with someone who caught a good deal on sugar, bought much more than normal and sold it off. He is not in the sugar business. One time gain. The gain has relatively little to do with the result of labor, more to do with a capital return on investment. I would not be paying self employment tax on that gain. Do it regularly and it becomes a normal part of your trade/business. Then you owe SE tax. There is no firm line in the sand when you file, only after the audit.


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## Randy south MS (Aug 7, 2013)

Bees?? What bees?


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## Daniel Y (Sep 12, 2011)

sqkcrk said:


> So how fast do you depreciate colonies? Isn't depreciation done w/ things that have more than one year life span/useful life? Such as equipment, buildings, vehicles?
> 
> Queens and nucs and packages would be expenses one would claim under Expenses on one's Schedule F, no?



From the same source as earlier. Notice numbers are not accurate as to current prices.

Bees
The bee investment is separated into two areas.
It is calculated on the basis of 500 packages
purchased at $18.00. The bees have no depreciable
value and the interest rate on the investment is
calculated the same as for the land (Equation 1 and
Table 3).
Number of packages (new colonies) 500
Price per package $ 18.00
Total package costs 9000.00
Other associated costs 0.00
Total investment in bees 9000.00
Trade-in value 0.00
Annual depreciation (none) 0.00
Annual interest $ 675.00

Hives
The estimated costs of putting one colony
together are listed in Table 4. Costs are based on
making 500 hives, each consisting of one brood
chamber and five supers. Notice that over 70% of
the costs are in beeswax (foundation), supers (wooden
ware) and labor. Hive investment is depreciable and
the interest on the investment is calculated the same
as for the building.

Building
Most operations need a building as a base of
operations and place to do honey extraction and
equipment repair. The figures in Table 1 show
estimated costs of a building with 2500 square feet, at
$17.00 per square foot and a life of 50 years. Annual
interest on the building is calculated as follows:
(Total investment/2 x .075). The 7.5% interest is an
average figure used throughout the fixed cost
categories.
ACRS is the Accelerated Cost Recovery System
Table 1. Estimated Costs of a Building
Number of square feet 2500
Amount per square feet $17.00
Total building value $42,500.00
Electricity 300.00
Air 100.00
Truck Doors 250.00
Total building investment $43,150.00
Trade in value (none) $0.00
Years to depreciate 18
Annual depreciation (ACRS) $3,883.50
Annual interest* $1,618.13
ACRS
Depreciation
(18 year
property class)
$3,883.50 9% 1st & 2nd year
$3,452.00 8% 3rd year
$3,020.50 7% 4th & 5th years
$2,589.00 6% 6th year
$2,157.50 5% 7th & 8th years
$1,726.00 4% until year 19
* (Represents potential interest income if funds were
placed elsewhere)
instituted in 1981. First year’s depreciation is
$3,883.50. Caution: Consult your attorney,
accountant or tax preparer for the latest IRS rules.
The figures presented in Table 1 for both interest and
depreciation are not necessarily those best for all
years and all operations.


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## snl (Nov 20, 2009)

sqkcrk said:


> Queens and nucs and packages would be expenses one would claim under Expenses on one's Schedule F, no?


I have several businesses and routinely expense any purchase of $250 or less. So i.e. if I purchased 2 colonies for $260, I'd expense them both 260/2=130. Same on woodenware. Nothing there costs more than $250 (for a complete hive)... So basically, except for equipment and bldgs, everything gets expensed in the year of use. Now let's suppose you're on a calendar year basis (YE 12/31) and you purchase a pallet of hive bodies on 12/18 and you are not going to put them into production (use) until the following year. In that case, the woodenware is not an expenditure it is a PrePaid Expense in the year purchased (and not deductible until the year you put it into use.)


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## Robndixie (Oct 20, 2012)

Daniel Y said:


> From the same source as earlier. Notice numbers are not accurate as to current prices.
> 
> Bees
> The bee investment is separated into two areas.
> ...



i built a 2400 sq ft commercial building last year and i think my accountant said i had to depreciate it over 31 years. i was shocked. i doubt i'll live that long.
i file schedule f but i'm also growing timber which is a long term crop and i'm a start up with the bees and everything else i'm doing so i'm losing money right now. but i'm a commissioned salesman in my day job and they withhold the maximum from me so i almost always overpay. this year i would have broken even if i hadn't stepped into farming. instead i get a decent refund but i spent a lot of money on land improvements, farm implements, erosion control and the bees to do it.


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## jim lyon (Feb 19, 2006)

Robndixie said:


> i built a 2400 sq ft commercial building last year and i think my accountant said i had to depreciate it over 31 years. i was shocked. i doubt i'll live that long.
> i file schedule f but i'm also growing timber which is a long term crop and i'm a start up with the bees and everything else i'm doing so i'm losing money right now. but i'm a commissioned salesman in my day job and they withhold the maximum from me so i almost always overpay. this year i would have broken even if i hadn't stepped into farming. instead i get a decent refund but i spent a lot of money on land improvements, farm implements, erosion control and the bees to do it.


Yes, unfortunately true. However if your building meets the definition of a single purpose facility such as a structure that is specifically designed for and could only be used for bee wintering, for example, then it qualifies as a section 179 equipment deduction that can be written off in one year.


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## Robndixie (Oct 20, 2012)

it has some finished space in it. my farm is 60 miles from where i live. i need to be able to shower and spend some nights there. 
i'll further divide the warehouse space into a work shop on one side and honey house on the other this year. next year i'm going to expand the apiaries and the the following year i hope to turn a reasonable profit.


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## sqkcrk (Dec 10, 2005)

Robndixie said:


> and the the following year i hope to turn a reasonable profit.


Then you are a farmer. Me too.


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## Robndixie (Oct 20, 2012)

sqkcrk, it's kind of funny that i rush to get away from my "desk" job to get to go work at a loss at a physically demanding job in the evenings and on the weekends. i plowed fields and worked bees all weekend this weekend and i'll go paint this evening and tomorrow. rain wednesday so i'll build frames and put in foundation. you get the idea. yes, i'm a farmer and in 4 years i hope that's all i'll be.


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## Saltybee (Feb 9, 2012)

For those asking which form to use it stays far less complex than the most complex situations. There is just less reward in getting elaborate.
Is it a current expense or a deprecation case? Most of the time section 179 is going to make that question moot. There are years when you want to keep depreciation for a better year. It is harder to keep it than expense it, oddly enough.
A package you want to produce a crop the first year and does, is a one year activity. The nuc box it came in probably can be depreciated as equipment by allocating the basis. Is that package going to grow through the next year before use? Rented out as a double? It probably would be improper to expense it in the purchase year when first used in the next year. 
Unless that is the way you consistently do it.


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## snl (Nov 20, 2009)

Saltybee said:


> It probably would be improper to expense it in the purchase year when first used in the next year.


When placed in service is the key.......

Another issue on depreciation... are you really going to worry about depreciating nuc boxes?? Expense them and be done with it..


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## bluegrass (Aug 30, 2006)

I think the OP is asking from a hobby/sideliner standpoint in which case the answer doesn't have to be this complicated. If you make a few grand on bees a year and you are filing your own taxes then put it on schedule F. If you are commercial and make your entire income from bees you will have a CPA doing the taxes anyway...


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## Saltybee (Feb 9, 2012)

snl said:


> Another issue on depreciation... are you really going to worry about depreciating nuc boxes?? Expense them and be done with it..


If you are already in a loss or at a low rate, hang onto it. There is no reward in losing more money.


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## Acebird (Mar 17, 2011)

bluegrass said:


> I think the OP is asking from a hobby/sideliner standpoint in which case the answer doesn't have to be this complicated. If you make a few grand on bees a year and you are filing your own taxes then put it on schedule F. If you are commercial and make your entire income from bees you will have a CPA doing the taxes anyway...


Thank God somebody made it simple.


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