A Few Thoughts by John Nalivka: Letting the IRS manage your business | TSLN.com

A Few Thoughts by John Nalivka: Letting the IRS manage your business

We all have some animosity toward the Internal Revenue Service. I think we would all agree that there are some services provided by government that must be funded. However, the negative side of how our tax dollars are used by government quickly offsets those activities that we feel should be provided by government.

From the perspective of agriculture, the estate tax is probably the most talked about tax that needs to be scrapped. It is a blatant transfer of wealth. After working your entire life or for generations to build that wealth only to have the IRS take some portion of it simply because someone thinks they are entitled to it is wrong – philosophically and morally. How often are farms or ranches sold simply to pay the estate’s taxes? I realize I would not likely win a debate on the topic with some or perhaps many people simply because I believe it is wrong to tax the value of an inherited estate. I will go onto another issue concerning the tax code and agriculture.

How often have you said, “I did pretty well this year but I bought such and such to avoid paying income taxes?” The positive part of that statement is that your operation must have been profitable. You may disagree and say the positive part is that you didn’t pay taxes. Well I wouldn’t necessarily disagree except I would pose this question. Wouldn’t it be better if you could save more of that profit as retained earnings for a rainy day fund rather than spend it so you won’t have to pay income taxes? I think this is particularly true when producers – I like that word – have to liquidate herds because of drought. You should have the opportunity within a specified time period to retain that income and use it toward rebuilding your herd down the road rather than worrying about current income taxes on those funds. At the same time, it is always more prudent to build a rainy day fund in anticipation of weather-related stress on your operation or simply market downturns. In 2017, Dakota ranchers have been faced with both issues.

In short, I think it is high time, we not only fought to eliminate the “death tax,” but it is also time to overhaul the tax code as it relates to business and building retained earnings from those profitable years. The IRS should not “make business decisions” regarding your ranch finances.


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