Volume 7, Number 9 - September 2001

This Month in Ag Connection

• Planning for 2002
• The Small, The Bad and The Buggy!
• Farm Safety Week
• Taxation Tidbits: Interest Expense Deductibility
• Take These Steps to Prepare Your Grain Bins

---

This Month in Ag Connection | Ag Connection - Other Issues Online

Planning for 2002

This is an excellent time to scout your crops for pests that have a potential to be a problem next year. There may not be sufficient time to record the observations after harvest begins and evidence of pests may have disappeared.

One of the main advantages of collecting this information at this time is the ability to better diagnose the problem. At this time of year, there are field days where additional information can be gathered. This combined with observations from neighboring fields will provide a large base of information to utilize in planning next year's crops.

Weed, disease, and insect problems provide information to evaluate the crop management program.

• Are the pests becoming resistant to the pesticides used?
• Was the proper rate of chemical used?
• Was the proper chemical used?
• Was there an error in application?
• Was there a problem with the application equipment?
• Was the timing of the application correct?

For more information, click here to view the Integrated Pest Management web site.

There are a number of diagnostic helps on this web page. If you do not have web access, you can obtain the information at your local University Outreach & Extension Office.

(Author: Wayne Crook, Agronomy Specialist, University Outreach and Extension)

---

This Month in Ag Connection | Ag Connection - Other Issues Online

The Small, The Bad and the Buggy!

Soybean growers need to be alert for soybean aphid. At this time, Michigan State Extension entomologists recommend a treatment threshold of 1,000 or more aphids per plant or when aphids are covering leaves and stems. These are high levels of infestation so growers are cautioned not to be "jumpy" about early treatments. A well-timed rain could do more against an infestation of these small aphids than an expensive pesticide.

Plots treated this year in Michigan showed good results from applications of Lorsban 4E or Penncap-M. The recommendations for applications in Missouri will have to come in the form of "Section 18' special emergency use permits from the Missouri Department of Agriculture. Emergency use labeling will be issued at the time the Section 18 is granted. Applicators will have to have the emergency use labeling on hand to legally apply insecticides to soybean aphid infested fields or have other labeling listing soybean aphid as a pest on soybean.

See other articles on this aphid in the:

• Ag Connections -- February 2001
• Ag Connections -- June 2001

(Author: James Jarman, Agronomy Specialist, University Outreach and Extension)

---

This Month in Ag Connection | Ag Connection - Other Issues Online

Farm Safety Week

Injuries to children are the focus of National Farm Safety & Health Week, September 16-22. Approximately 100 children and youth die in farm work accidents each year in the U.S. and many more are seriously injured. So this year the theme for Farm Safety Week is 'Kids #1 in 2001'.

Children can be injured riding on tractors, in grain wagons, or in activities around grain bins or chores with farm animals. Children can also drown in farm ponds or manure pits.

Tips to keep children safe on or around the farm:

• Do not allow children to roam freely on the farm. Design a safe fenced play area.
• Inspect the farm on a regular basis for hazards that can injure children. Be sure farm ponds and pits are fenced.
• Assign children only age-appropriate work tasks; train and constantly supervise them.
• Equip all barns, farm shops, chemical storage areas and livestock pens with door latches that can be locked so children cannot enter.
• Always turn equipment off, lower hydraulics and remove the key.
• Never carry children on tractors and other equipment.

(Author: Karen Funkenbusch, MU Rural Health and Safety Outreach Program)

---

This Month in Ag Connection | Ag Connection - Other Issues Online

Taxation Tidbits: Interest Expense Deductibility

Given the capital intensive nature of agricultural production, it should not be surprising that interest paid is a substantial business deduction for many producers. The deductibility of interest payments varies according to the use of the borrowed funds.

The first step in analyzing the tax planning opportunities or the traps involving interest expense is to divide interest by categories:

• personal interest,
• home mortgage interest,
• investment interest, and
• business interest.

The difference in deductibility of these various types of interest expense is substantial and, as you might expect, the IRS is focusing more and more attention to interest deductions during audits.

Many farmers tend to utilize one or two primary lenders for most of their credit needs. Subsequently, it is very easy to get into the habit of not developing a documented trail allocating interest expense between business, investment, home mortgage, and personal interest categories.

Personal interest is not tax deductible. Personal interest is any interest that is not home mortgage interest, investment interest, or business interest. Personal interest includes interest incurred on personal auto loans, loans for the payment of income tax, and credit card finance charges.

Home mortgage interest is generally deductible as an itemized expense on Schedule A. To be considered home mortgage interest, the interest must be from a home mortgage to buy or build, or from a home equity mortgage loan on your principal or second residence. However, the proceeds from a home mortgage or equity loan are not restricted as to use. An exception to use rule is that interest is not deductible if the proceeds of the home mortgage loan are used to purchase securities or certificates that produce tax-free income.

Investment interest (other than interest incurred to produce rents or royalties) may or may not be currently deductible. Generally, investment interest may be deducted up to the amount of investment income and any excess expense must be carried to subsequent years and deducted against investment income in those years. Interest expense incurred on loans related to income producing rental or royalty property is deductible on Schedule E and is fully deductible unless limited by the passive activity rules. In general, interest and other passive activity expenses are currently deductible to the extent they do not exceed the income from the passive activity. However, there is an important exception that allows up to $25,000 of loss to be currently deductible from a rental real estate activity in which the taxpayer actively participates and if the taxpayer has an adjusted gross income less than $100,000.

Business interest is fully and currently deductible. However, given the difference in deductibility of interest, it is increasingly important to avoid commingling business borrowed funds with non-business funds. If you are a sole proprietor, the use of two checking accounts is highly recommended - one for business and one for non-business transactions. In addition to understanding the interest expense categories, there is one potential tax trap of which cash-basis taxpayers should be aware.

Farmers and other business owners on cash-basis accounting frequently make year-end adjustments to their net income by paying accrued interest. The IRS has ruled, and this ruling has been consistently supported by the courts, that interest is not currently deductible where the taxpayer issued a check in payment of the interest, but at or near the same time borrowed additional funds from the same creditor. One option that has been successful is to borrow funds for the interest payment from a different lender.

(Author: Parman R. Green, UO&E Farm Business Management Specialist)

---

This Month in Ag Connection | Ag Connection - Other Issues Online

---

This Month in Ag Connection | Ag Connection - Other Issues Online