America’s Land Auctioneer
Captivate and celebrate the dynamics of rural America, American Agriculture and inspire and teach others how to live a bold and abundant life in rural America. Background: The intrigue, endless opportunities, and romance of rural life in America have never been more on the minds of Americans. The recent pandemic and civil unrest have Americans of all ages earning for a more peaceful, less hectic life. Even billionaire Bill Gates is now the largest crop landowner in America. As many Americans look for peaceful refuge in the rolling hills and wheat fields they are faced with a richness of opportunities. But where do you begin to look? This show will highlight and feature endless opportunities in every state. What is it that is so unique about rural America, the land and what it produces? How can I live that life? The American Land Auctioneer will tell stories and weave into those stories a place for you to dream, live and enjoy the abundance of all that rural America has to offer.
America’s Land Auctioneer
Unlocking Tax Savings in Your Soil
Farming isn't just about what you grow above ground—it's also about what lies beneath. The fertility of your soil could be worth thousands in tax savings through a little-known provision that's been hiding in plain sight for over 60 years.
Stephanie Scherbinski from Arthur Companies joins us to unpack Section 180 of the IRS tax code, a powerful tax strategy allowing farmers to depreciate soil nutrients when purchasing farmland. While farmers have long been able to depreciate equipment, buildings, and improvements, the land itself has traditionally offered few tax advantages—until now.
We explore how this overlooked tax provision works in practice. When you purchase farmland, comprehensive soil testing can identify valuable nutrients—from nitrogen and phosphorus to zinc and boron—that represent a depreciable asset. The numbers are striking: farmers in the Red River Valley are seeing deduction values of $1,800-$1,900 per acre, while those in central North Dakota average around $1,200 per acre. On a quarter section of land, that could mean tax savings approaching $100,000 for farmers in higher tax brackets.
Stephanie walks us through who qualifies (active farmers, inherited land) and who doesn't (gifted land), while addressing common questions about the process. Unlike some tax strategies, Section 180 can be utilized repeatedly as land changes hands through inheritance, creating multi-generational tax advantages for farm families.
As land prices continue to climb and margins tighten, this tax strategy could be the competitive edge farmers need when expanding operations or helping the next generation get started. Whether you purchased land recently or years ago, Section 180 might be the financial tool you've been overlooking.
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Welcome to American Land.
Speaker 2:Auctioneer. I'm Steve Link, broker for Piper's Auction and Realty. Thanks for spending your time with us today and, just a reminder, you can catch up on all our previous episodes by visiting piperscom and clicking on the blog tab, and you can also listen anytime on Apple and Spotify. A big thank you to our sponsors, pifers Auction and Realty and Pifers Land Management. Whether you're looking to sell your land or equipment or need professional farmland management, nobody does it better than the team at Pifers. Well, I'm really excited about the insightful show we have today. It is timely.
Speaker 2:We are right around tax season, april 15th and I haven't met anybody that loves to pay taxes, other than the fact that if you're paying taxes, that means you made money. But the conversation that I have a lot in my business and my line of work of selling land is when people buy farmland versus other assets, there is a lack of depreciable asset on it and so unless there's drain tile or irrigation systems or fencing or assets like that, they struggle to find ways to depreciate that asset and do some tax strategies and that's a big part of the rural landscape with tractors and equipment and combines and things like that to depreciate it. But when you're buying farmland. It's really limited to it. So, but recently I have seen tons of advertising and tons of literature and talks talking about the 180 nutrient soil, nutrient depreciation, and I asked Stephanie Sherbinsky from Lair to come in and talk to me about that.
Speaker 2:Stephanie, you are with Arthur Companies and Arthur Companies has you know locally and regionally well-known company. They've been around for a long, long time. Stephanie, tell me a little bit about yourself.
Speaker 3:Well, thank you, steve. Yeah, so I'm Steph Scherbinski. I am employed with the Arthur Companies. We are a family-owned business based out of Arthur, north Dakota. It's been family-owned since 1906. And we have a full-fledged agronomy and elevator services in North Dakota and has recently reached out into Idaho. And so thank you for having me today. A little background on me I started with the Arthur Companies about six, seven months ago and, yeah, this is kind of a new thing that the Arthur Companies is allowing, or we have given, to our producers and then kind of expanding to more than just our customers. But it's an exciting time and it's been very, very beneficial for producers and landowners, especially out here in the Valley.
Speaker 2:So, steph, where did you grow up?
Speaker 3:I grew up in rural North Dakota north of Stanton, North Dakota, Yep. I went to high school in Hazen and got my master's at NDSU, my bachelor's at Dickinson State and now I reside in South Central North Dakota.
Speaker 2:So, being a Hazen Stanton resident, you grew up that's a big egg area, cattle farming, row crops, small grains and things like that. You grew up on a farm.
Speaker 3:I grew up on a small cow-calf operation. Yes, Okay. In the heart of coal country as well.
Speaker 2:Exactly, and so there was lots of coal happening, coal mining happening in that area, and it's been fascinating for me in my career to see that area and how some of the producers that have had farmland have taken those natural resources and been able to sell those and really expand their operations and such you know. And so when I first met you you were working for the coal company, right?
Speaker 3:Yes, Yep. So right out of college I got a job with a coal fired power plant in central North Dakota and I worked in regulatory environmental aspects of it, kept the lights on, kept the doors open, and so that's kind of where a little bit of my experience came from with section 180 is working with the federal and state regulatory agencies, and so that was kind of the intriguing aspect of my education is I had that background but, also, I married a farmer and a rancher and I came from the agriculture industry as well, so I had that kind of that perfect mix set up to come to the Arthur companies and do this for them.
Speaker 2:Right. So, by the way, I know your husband really well and since I've met you, he's way over married, so we can put that right out in the air for everybody to hear that and I'm sure he'll appreciate that. But what was it like growing up in that area? And I'm sure you know you're a landowner, you're a farmer and you're a rancher and working for a company, and there was probably times where you had to fight your own mind on representing your company. But yet having that passion and that background of being a landowner and growing up on a farm Did that put you in difficult situations.
Speaker 3:Not necessarily difficult, but it gave me a different outlook on it because I knew the side where industry was coming from. But then I also could turn around and put on the hat of a landowner and I got to share those experiences and maybe some of those concerns that landowners would have with the industry and to kind of mend that tie so industry could understand where landowners were coming from, outside.
Speaker 3:of just talking to the landowners so industry could understand where landowners were coming from, outside of just talking to the landowners. Do a little bit more of in-depth in-house discussions with the industry side of things on the landowner side, and then also vice versa. Where is industry coming from? Do a little bit more of the educating being kind of the middleman but educating on both sides for the better.
Speaker 2:Sure, and what was your degree in? My undergrad was natural resource management, with minor in ag business, and then my master's was in range science, which I studied surface mine reclamation. Okay, so we have something in common, because I had a natural resource management degree from from NDSU, and when I started cause I'm much, much older than you, but when I started that was a new program and you know it really set a foundation for my, for my line of work too, so we have some commonalities there. So, okay, so now you are with Arthur. How did that happen? You're out in Lair and Arthur Companies. I know is all over. Like you mentioned, they're all the way to Idaho. Is it wheat? Is that what? They're big in Idaho.
Speaker 3:Is that kind?
Speaker 2:of the big thing, which is parallel to a lot of Central North Dakota and Western North Dakota, is wheat and and even on the East side. I mean, I know we're a lot of row crop on the East side here, but they use wheat in the rotation and it can this. This land on the East side can really grow some good wheat. But how did? How did?
Speaker 3:Arthur companies find you. You know I left the power plant and I was working for an engineering firm being a consultant on the environmental side for multiple different industries, including being a consultant on the environmental side for multiple different industries including agriculture. And I moved down South Central North Dakota with my husband when we started a family and my husband actually had an agronomist from the Arthur Companies that was working with him and just kind of through small talk was what's your wife do? Oh okay, and got to knowing me a little bit with his agronomist and it was just kind of that's what kind of got the ball rolling. He was interested. He had just done section 180 himself and he was. That was a big kind of buzzword for, say and um, took it back to the Arthur companies and here I am.
Speaker 2:Wow, Okay, so they lucked out and they found you. Um, cause Lair isn't usually a hotspot for, uh, for for businesses to be traveling through, but I love that area, that I spent a lot of time down there and and but, and so they they found you. What are some of the services that Arthur Company provides to, to, to, to landowners.
Speaker 3:So we have a full-fledged agronomy center and qualified agronomists throughout at our three locations here in North Dakota, arthur, air and Pillsbury. Throughout at our three locations here in North Dakota, arthur Air and Pillsbury full-fledged elevators as well, and so we have pretty much anything you need with seed sales, fertilizer, chemicals and then obviously the elevator services as well. But then also we do Section 180 calculations for farmers and we're starting up some sustainability programs with our end users as well, for our customers.
Speaker 2:All right, so you mentioned Section 180, and that's what our topic is going to be today. Give me the elevator version of 180. When people hear that, I kind of know where it comes from. But where is that? What is 180? What is that?
Speaker 3:Yeah, so Section 180 is a tax law that has been in the IRS ruling since the sixties. I think it was December 31st, 59 exactly, is when it when it came about and people are like this is a new rule and it's like, no, really it isn't. It's just been kind of hidden back in the books and not highly used. So it's been resided against right beside 179, which farmers have been using for decades in the tax law. So what it is is it allows farmers to take a deduction for essentially fertilizer costs, nutrient costs that reside in the soil, and it's been a huge hit for farmers. Kind of a few things that needs to be, that is, in the rule, is it needs the land needs to be used for farming purposes. The farmer should be the active farmer. There are a few other caveats to the land as well and essentially we calculate the residual fertilizer in the ground at the time of purchase and calculate what that is for the farmer and ultimately get them a dollar value of depreciable assets.
Speaker 2:All right, so that was a very good summary. So the 180 for everybody's listening is is an IRS code, that is, it's referred to and that that IRS code cause in our business? You know we talk about different IRS codes and the you mentioned the 179, the equipment and infrastructure depreciation that they can use, that farmers can use on it. In my line of work we use a lot of 1031s, which is like-kind exchanges. We use some 1033 in this area, which is if there's a potential for eminent domain. We use 721s, which are upreets in real estate. You know there's.
Speaker 2:Yeah, so those are some of the tax codes and so now I'm learning, I'm adding to this, and if my 20-year-old version of me would have ever thought that I would know these codes and care about them, I think he'd think I was crazy. But it's really a big deal in the business world, in the farm land world, to understand these and to utilize them to the best of the ability for farmers and producers. Is the 180, and we have a short time here but is the 180 the only part of the tax code that you guys are dealing with, or do you have to utilize some other tax codes in there too?
Speaker 3:Right now we're running the evaluation for the 180 for producers, simply because there's a lot of land changing hands right now and it's something that these producers can take part in, especially with the going land prices.
Speaker 2:Sure Well, for those listeners that want to contact me and get kind of a summary, I made this little summary sheet of these IRS tax codes. It's super short, it's super simple. If they want to email me at stlinkatpiferscom, that's S-T-L-I-N-K. At P-I-F-E-R-S dot com, you can get that as we wrap up this first segment. Thanks again to our sponsors, Piper's Auction and Realty and Piper's Land Management. Their team brings unmatched experience to landowners looking to maximize the value on their land and equipment.
Speaker 1:Stick around for their next segment $1,500, $1,500, $1,500, $1,500, $1,500, $1,500, $1,500, $1,500, $1,500, $1,500, $1,500, $1,500, $.
Speaker 2:Welcome back. You're listening to America's Land Auctioneer and I'm your host, steve Link. This segment we're going to dive into the unique tax value of nutrients sitting in your soil. That's right. We're talking about real dollars hiding in the ground. That's right. We're talking about real dollars hiding in the ground. Before we get into that, I want to thank our sponsors, pfeiffer's Auction Realty and Pfeiffer's Land Management.
Speaker 2:Whether you're looking to sell your land or your equipment or need professional farmland management, nobody does it better than the team at Pfeiffer's. And again, you can go back. We got a lot of information that we're giving numbers and terms that you know. For me, I need to hear three or four times before it sticks. I mean, I've been doing this for 25 years, almost 25 years and I still finally feel like I understand 1031 tax exchanges and all of that that I can say it verbatim. But it took me a long time to hear that. So we're going to go over some details. But you can go back to Piferscom or your Apple and Spotify and listen to this and re-listen to it so you can get all these terms. But all right, so let's talk about the soil and what's there. Can you explain the residual soil nutrients and why that matters. Right so the residual soil nutrients and why that matters.
Speaker 3:Right. So the residual soil nutrients is at the time of purchase. So when you acquire land, the nutrients in the soil at the time of purchase will have some type of value to you. Obviously, if you're buying cropland, you're buying cropland and if you're spending a premium on it, you know it's good, fertile soil. So what is that fertility? What is actually in that and what is the benefit to you is what this, essentially this tax code, allows you to deduct. So if you're buying good, high dollar crop land, like you guys see out here in the valley, you're spending a premium on it compared to what you would purchase for crop land out in western north dakotaificant difference based off of nutrients.
Speaker 3:So the nutrients in the ground put a dollar amount to it. You can use those nutrients in the ground over a certain time period. There's probably, as we're seeing, there's a buildup of nutrients in the ground over how many years of useful? You know useful life for, say, no different than any other depreciation. What's the useful life? So you can depreciate this value out on a depreciation schedule as well, depending on your value in the soil.
Speaker 2:So the nutrients, are we talking phosphorus, potassium, nitrogen?
Speaker 3:Yes, all of the above, it's all your macros. So your nitrogen, phosphorus, potassium, calcium, magnesium, and then your micros as well, your boron, zinc, copper, manganese and iron as well, are the nutrients that we run the evaluation against. So I mean, I have yet, and you probably never will, get a return on nitrogen. There's never a surplus of nitrogen in the soil, okay, that's always used. Not very much do you see a return in sulfur either, but the rest of the nutrients. You can have the potential of seeing some type of dollar value associated with that.
Speaker 2:And now I'm not remembering my soils classes from from college, but I mean there's. Is there tens or twenties or hundreds of uh nutrients and soils that you test for, or how many are there? Do you know?
Speaker 3:off the top of your head, I don't um but, like I said, the nutrients we test for in section 180 are the ones that I, just your macros and your micros. Okay, so when you're talking to producers and they call me, they're like, well, what do I need to test for? And I'm like, well, it's your macros and your micros, these are the values that we run again, we run um on our equation and get back to you for a dollar value per acre and and you mentioned when we talked, and I've heard, I mean there's, there's numbers, what?
Speaker 2:15, 16, 1700 bucks an acre or better that, that you put value on that yeah.
Speaker 3:So a lot of the clients we've been. We started with Arthur Company clients but we've since expanded. Word of mouth is getting out. There's a lot of producers that are calling, reaching out to us hey, I purchased land last year. Can I do this Absolutely? And so out here in the Valley I mean on average I'm seeing $1,800, $1,900 per acre in the valley. Again, that's average. And we've also Arthur Companies has a territory kind of the 83 north of I-94 territory In that I've seen an average about $1,200 an acre up there. So the Harvey Anamos Drake area we also have facilities out in that area and so I've been doing some for producers there. So the Harvey Anamos Drake area we also have facilities out in that area and so I've been doing some for producers there and it's still seeing a huge return for guys outside of the valley as well.
Speaker 2:Okay, so I'm going to do some public math, which is not always great, but so, if you're in, let's just use $1,500 an acre. If they value the nutrients at $1,500 an acre and I'm in the 30% tax bracket, you know how I see how I did that Right, um, um. So you have $500 that you can write off on on that and save um. Save that per acre which is.
Speaker 2:Which is that's meaningful? Absolutely, that is really meaningful and in a market like today that really matters. You know commodity prices aren't great. You know we have all these things going on in the world that we are not even going to get into because we're not a political talk here, but you know that's really meaningful dollar value. So what makes what makes a landowner eligible? And I'm going to back up here a little bit and I'm going to give our disclosures I'm just a merely land broker. I'm not a tax expert, I'm not a uh, an accountant, I'm not an attorney, I'm none of that. All of this we're bringing up, steph, you can probably agree with me. We're bringing up so you can ask the right questions and get the answers that are going to be appropriate. Your role in this, just so our listeners know, is to do I'm going to let you what's your role in this process.
Speaker 3:Our role is essentially getting you the value. We're doing the calculations based off of what is in the soil, based off of the best available technology. We have to collect the data out of the soil and we are putting a dollar value to it, based off of fertilizer prices at the time of purchase.
Speaker 2:Okay, so that was important. That's just kind of like when we talk about setting bases for land time of purchase um, you are, you have to figure it out. So if I bought something three years ago, um, is it still worth it for me to do it if I bought it three years ago?
Speaker 3:Yes.
Speaker 2:And now you have to go back and look at what those nutrients value was three years ago, and so you have ways to do that.
Speaker 3:Yes, we do so. The kicker to Section 180 is the equation needs to be done at the time of purchase. So I tell producers when they call me they're like hey, I bought, I bought land this this year. Do I qualify as absolutely it's the easiest for you to do it in the year and apply it to your taxes in the year of purchase. So right now we're we're ending April 15th, we're close If you purchase land in 2024 and you have this, this is the easiest to do it in the year, your tax year of purchase. If you purchase land in the last three years, I tell guys it's easier just because you can go back and amend that. You can go back and catch up your depreciation for, say, and then the last five years. I say it's easy and after that it's still doable.
Speaker 2:It's still doable it is still doable.
Speaker 3:Just got a few. Probably need to dig in your record books for me a little bit more to come up with the information that we'd be requesting, but it's still very doable for the producer.
Speaker 2:And then is it typical to people and this again isn't your side of the equation but do people typically try and write it off in one year, or do they spread it over time, or it's up to their individual situation?
Speaker 3:Yeah, it comes down to you and your CPA. We, you know, like I, like I told you, steve weve, we give the value right what is in the soil. We do this, the science behind it, the equation behind we. Give you that dollar value, you take it to your cpa and you determine what works best for you, because everybody's situation is different. I don't ask questions.
Speaker 3:I don't need to know that right I just give you a dollar per acre, and but yes, you can take it all in one year if you need to. In the year of purchase, or you can amortize it out.
Speaker 2:Sure, sure. What makes a landowner and we're running short of time again but what makes a landowner eligible?
Speaker 3:Landowner is the land purchased land needs to be active in farming, whether it's crops and or pasture. Pasture land also qualifies you as a producer, should be the one also, you know, active in farming, utilizing it in some way, shape or form. Now there are ways you know in the tax law that you don't have to be the active farmer. You could be renting it out. There's just some different hoops you got to jump through in that. But ultimately if you are the farmer farming the land the land is in for farming purposes, whether it's cattle you know, grazing, haying or row crops or crops at all, you qualify.
Speaker 2:All you know grazing, haying or row crops, or crops at all you qualify All right. So that's a lot to unpackage and again, I'm going to encourage people to go and try and re-listen to some of this so they can take notes and get ahold of Stephanie. Stephanie or Steph, what's the best way to get ahold of you?
Speaker 3:My email is strubensky at arthurcompaniescom. Or go ahead and give us a call at Arthur, then they can transfer you over to me and I'd be happy to take any calls.
Speaker 2:All right, and if they don't know how to spell Sherbinsky, they can Google it and they're going to find you somewhere, right, they're going to find you. They probably are Yep, yep. All right. As we close out this segment, again, I want to thank our sponsors, pifers Auction Realty and Pifers Land Management. If you need trusted guidance in your farmland or equipment, start with the pros at Pifers.
Speaker 1:We'll be right back after these messages.
Speaker 2:Welcome back to America's Land Auctioneer. I'm Steve Link, broker for Piper's Auction and Realty. Thanks for spending your time with us today and, just a reminder, you can catch up on all our previous episodes by visiting Piper'scom or listening on Apple or Spotify. Again, a big thank you to our sponsors, pfeiffer's Auction and Realty and Pfeiffer's Land Management. Whether you are looking to sell your land and equipment or need professional farmland management, nobody does it better than the team at Pfeiffer's. All right, we're here with Steph Scherbinski and we are hitting a lot of awesome topics that I think our buyers are going to be really intent on learning more about, and so I'm going to encourage them to listen to this episode. But let's get into some of the nuts and bolts of the 180 nutrient deduction process. What is the process for soil testing?
Speaker 3:on this, so the like I said this, this ruling came back and was put in the books, you know, early 1960. And so essentially what we need is to know what it was in the ground at the time of purchase. So the best way to do that is soil sampling. Now, you know, at the Arthur companies we provide that service. We can totally do that for you. If you are an active farmer and you have another consulting firm that collects the soil samples for you, they can do that as well. I just need to know the type of soil sampling grid sampling, composite sampling, that type of stuff. A lot of farmers are turning to variable rate sampling. We need all of them and we'll use all that data. The more data we have, the better we can put into our equation to get them, you know, a better value.
Speaker 2:All right, that's a new term.
Speaker 3:The new accurate value.
Speaker 2:Variable rate. I know variable rate application, but variable rate testing, how does that work?
Speaker 3:Kind of the same concept of where you apply the fertilizer, throughout the field you map it.
Speaker 2:Okay.
Speaker 3:And in those areas is what is another soil sample? Oh that makes sense so on your map is red, orange or red, yellow and green. For instance, you'll take a soil sample in your reds. You'll take soil samples in your yellows. So instead of having one soil sample given back or a couple of soil samples as an average backed to us, you can have three different values. You would need all those as an average backed to us.
Speaker 2:You can have three different values. Sure, you would need all those. Okay, so the soil testing very familiar with that. Just about every farmer does that at some point and some do it regularly. They do it all the time, and so you collect that information. And now, what do you do with it? Send it to me, send it to do with it.
Speaker 3:Send it to me.
Speaker 2:Send it to you, yep, send it to you, and then you have the programs that put it in there.
Speaker 3:Yep, I might, you know, ask you. We have an application process. We'll ask you a few more other information. You know a time of when did you purchase this? Did you plant it Anything before you know? You called us on. You say you purchased this land in February. You called me in September. Okay, did you? What did you plant last year? Did you take soil tests? No, we planted beans. Okay, great, you took soil sample the fall. Okay, now I might need some information because we your starting point is at the time of purchase.
Speaker 2:Sure.
Speaker 3:But if you took a soil sample, you know at the time of purchase or you're purchasing land, hey, I'm finalizing some land I need. I want to do this. Great, We'll send some guys out for you to take soil samples.
Speaker 2:And so I've read somewhere where, like benchmarks and stuff like that, do you need that or do you have that, or isn't that even apply anymore?
Speaker 3:The benchmarks it's. It's a baseline, and so we have that.
Speaker 3:So we have that. We have established that baseline based off of university studies and pretty much a lot of NDSU studies of values that they came up with. So it took some time to build our baseline and we have that. So essentially what I need to know is what is in your soil. And again, for listeners, if you do do this soil sample, make sure you do all your macros and all your micros. Some guys just do the basic, know the basic five, the top five. But if you're willing, if you're looking into doing Section 180, make sure you get the full panel done.
Speaker 2:Okay, and then how do you have a? You must have an elaborate spreadsheet that has the values over the last how many years, of these nutrients, right, yep?
Speaker 3:Yep Fertilizer costs.
Speaker 2:Yep, and of these nutrients, right, yep, yep, and fertilizer costs, yep, and so you put that into your program and it shoots it out. Shoots out the number yep, is it. Uh, is how long does it take the computer think to think about it? Is it like instantaneous and so well?
Speaker 3:it depends on the updates on my computer. No, yeah just kidding. Um, it doesn't take, you know, too very long, but it's, it's the data collection it's for us to review. Um, you know if, if, if it's newly purchased land, we have those values. If you purchase land in the past, you know that's where it takes some time to go back to dig up fertilizer costs associated with the year of purchase.
Speaker 2:So you personally, how far back have you? One of your clients asked you to do an analysis.
Speaker 3:Last week I had we had a growers meeting and I had a client come up to me and ask he's like I purchased land in 1993. And I'm like okay. He's like, can I do this? I'm like, well, technically, yeah, I said, but do you have data? And he's like, oh, I'd have to go through my record. That's a lot of remembering for me. I'm like, okay, buddy, quite be in your best bet. And besides, if you would do the catch up 3115 tax form for the catch up depreciation catch up, you know your land might've been depreciated out Right Since 93.
Speaker 2:Right.
Speaker 3:So that's like the oldest, but I haven't ran a report, but that's the oldest sure he has approached me and asked can I do it?
Speaker 2:And you and you should be really cognitive of of what well, yeah, what fertilizer values were, you know, right? I mean, fertilizer values have now feel high and all input costs seem high, but there was a time frame when it was cheap. Fertilizer was cheap to put on, Nutrients were cheap to put on, and so that might not maximize your energy and time on it and such.
Speaker 3:But in correlation to that, steve land prices are also much lower than they were today.
Speaker 2:That is true. That is true. You know we talked a little bit off air. So if I find some land that I purchase and it's worth $1,500 an acre, which you can still find land in North Dakota worth $1,500 an acre, which you can still find land in north dakota worth for 1500 bucks an acre, and you do your analysis and there's no way it's going to come. It's going to be that or higher, right, it's just not possible to to have it higher than the value. Well, your value.
Speaker 3:There's, there's possibility your value might come back higher. Yeah, but the the chances of you being able to write, write your land off 100 on on. This is not going to happen.
Speaker 3:I mean that's going to be probably an automatic red flag right off the bat. But now the value that you know it does come back. Whether, say, you paid $3,500 an acre and you get a value of $1,200 an acre coming back on this report, you could take 100% of that deduction in the first year, or you can amortize it out. Right, you could take 100% of that deduction in the first year, or you can amortize it out Right.
Speaker 2:Okay, so I'm getting some email questions on here and again we might get out of our wheelhouse here, but I got a question from a listener in Barnes County. He writes I purchased land from one of Piper's auctions great three years ago and he's been renting it on a crop share and he plans to keep it and pass it to his family. He doesn't farm full-time. Is the deduction something that he should use?
Speaker 3:yes, he still can. He he's still an active farmer. The land is used in farming.
Speaker 3:He is still an active farmer okay so yes, he can take the deduction and just because and now you had mentioned he plans to pass it down for his grandkids, kids or whatever to inherit, even though he takes this deduction and say he passes and he passes it on to his son and his son is a farmer, his son can take the deduction again. So there are a few caveats in the ruling. Is you know, land has got to be active in farming. This law was written for the active farmer.
Speaker 3:It's not really for the investor was written for the farmer um, you also can do it on inherited ground. So if you say you inherit ground from your, your father, your father-in-law, your uncle, and you are farming it, you can do this. Deduction CRP ground acres do not apply until it comes out of CRP, but gifted ground does not qualify. You need because, you need to have a basis in the, in the land.
Speaker 2:Sure, sure, okay, so that was a lot to unpackage there.
Speaker 3:Long story short. Newly purchased land inherited ground.
Speaker 2:Yep.
Speaker 3:Not gifted.
Speaker 2:Okay, perfect, perfect, all right, so listener.
Speaker 3:Yeah, one more thing, steve, not to cut you off, it's also um. Guys are like well, what if I was renting it prior to purchasing?
Speaker 2:Okay.
Speaker 3:You can do it, yep. However, you're writing off the fertility.
Speaker 2:Right.
Speaker 3:So I tell guys, you still got to be able to pass the red face test. No-transcript, you're wanting to deduct that fertilizer again?
Speaker 2:Sure.
Speaker 3:So yes, you can do it.
Speaker 2:Yep.
Speaker 3:But you got to pass the. You know it's going to be hard to say. I say to pass the red face test. So I am encouraging our producers of newly purchased ground for this deduction.
Speaker 2:All right, this is another great question we got from a listener. So I've been farming full time for about four years. I'm looking to buy my first piece of land. Is there any way to estimate the deduction before I buy something or close on something?
Speaker 3:Yes and no. Okay, based off of soil samples. So if they have, you know they're buying it privately and they have soil samples from this fall, last fall, and they're purchasing it in the spring. There's there's a rough estimate I've had producers are like, is this going to be worth my time, stuff. And I'm like, well, yeah, well, you know the guy who had my land prior, he wasn't. He was at retirement age. He didn't really care anymore. The land wasn't taken as care of as it should have. There's probably nothing in the soil. I've gotten that a few times. Okay, sure, send me your soil sample. Took a quick look at it, like, yep, this is going to be worth your time. So I mean, yes, hindsight. Yes, do I want to do that for all my clients? No, because it's time for me.
Speaker 3:But, I do have a way of giving them a rough estimate or just taking a look at their soil sample and be like, yeah, this is going to be worth your time.
Speaker 2:Well, and this might be a new trend we do a lot of it when there's mineral interest in it gravel, sand, stuff like that, where people ask to have permission to go out and do some soil sampling and take care of it. I've had a few instances on farmland to go out and take soil samples prior to them bidding at auction, and so this might be a new trend. For some of our buyers is to go out there and figure that out, and so they can analyze if they should bid more or not at our auction. But yeah, so I'm excited about all of that. Boy. We got a lot more to unpack here in our last segment, so listeners, please stick with us Again. Steph, how do they get a hold of you? What's the best way to get a hold of you?
Speaker 3:Yeah, best way to get a hold of me is either call the Arthur facility and I don't know the number off the top of my head, but we can get that for you. You can Google it or my email is S and then it's Sherbenske S-C-H-E-R-B-E-N-S-K-E at ArthurCompaniescom.
Speaker 2:Perfect, perfect. As we close out this segment, another quick thank you to our sponsors, Pfeiffer's Auction and Realty and and Piper's Land Management. If you need trusted guidance in your farmland and equipment, start with the pros at Piper's. Well, stick with us for our last segment as we close things out here with Steph.
Speaker 1:I'm going to get a new one, 35 and a half, so see you right there. Good bird, great Bye.
Speaker 2:Welcome back to America's Land Auctioneer. I'm Steve Linkbroker for Pfeiffer's Auction Realty. Thanks again for spending your day with us and this is our last segment. And if you missed anything, like I've said repeatedly, go to Pfeiffer'scom and click on our blog tab and listen to any of our episodes there. Or go to Apple or Spotify and type in the search our Pifers and you'll get our blog and listen to this episode, because I think you have a lot of valuable information. A big thank you to those sponsors of Pifers Auction and Realty and Pifers Land Management. Whether you're looking to sell or buy equipment or land or need professional farmland management, nobody does it better than the team at Pfeiffer's. All right, we're here with Steph Scherbinski, with Arthur Companies, and we've been talking about the 180 nutrient deduction code in the IRS and what the process is and how to do it, and I'm fascinated. Let's talk about some examples that you've had with landowners. Again, how do you charge for this service?
Speaker 3:We charge a $30 per acre flat fee.
Speaker 2:So $30 an acre flat fee that first one when I did public math during the first segment. If I had a $500 an acre deduction and you charged me $30, that's money in my pocket.
Speaker 3:Yeah, you know, on a quarter, 160 acres. 30 bucks an acre is $4,800.
Speaker 2:Right, it's going to run you, and then the 500, yeah, let's do. Do you want to do public math there? No, so 80 grand, right, right, and so that is real money. Now you have to make money to get that deduction. But a lot of people make money, especially farmland, and make money especially farmland, and you can, or farm owners and landowners, they can shuffle things and so they make money certain years, right, yes, the cattle business has been good. You guys are in the cattle business, right?
Speaker 3:We are.
Speaker 2:What do you guys run?
Speaker 3:A commercial cow, calf, and we have purebred Angus.
Speaker 2:Purebred Angus, and are you still in Stockman's? Are you part of Stockman's?
Speaker 3:Stockman's Association yep.
Speaker 2:Does that keep you busy?
Speaker 3:Well, we're just a member of the Stockman's Association, but yeah, I'm also a board member for the North Dakota Angus Association.
Speaker 2:Oh, the Angus Association. All right, eat your beef, makes you healthy, right.
Speaker 3:Absolutely.
Speaker 2:All right, so let's get. Yeah, let's talk about some examples. Like you've mentioned, you know there's Passionland you you know there's pasture land you can do it on. But pasture land has got to be a little bit tricky too, because sometimes that's a lower dollar value. Until recently we've had some big sales. We've had up to 2000 bucks an acre. We even had one last week that I hate to say it over the air but I'm gonna brought over 3,500 bucks an acre for pasture land. And you know that's going to be grass because there's easements on it and that was the intent of those easements were to keep it into grass. But you know that's. The pasture lands have been becoming increased. So you might be might get busy in that. But can you give an example of what you're seeing for some of your producers on what the numbers are?
Speaker 3:Yeah. So, like I said earlier that roughly out here and I don't want to say just the Valley, but it's over in the Eastern part of the state we're seeing, you know, on average, about 15 to $1,600 an acre of deduction. You know that that's what you can apply to this. Um, in the North central area, um, we have producers up there I'm seeing I've seen, on average, about $1,200 an acre return. Western North Dakota. You know I haven't had a client out there, but you know, is it still worth your time? Probably.
Speaker 2:Sure.
Speaker 3:Yes, you know, I'm not going to say it's not, because obviously even $800 an acre or $500 an acre is still a huge return for producers and growers.
Speaker 2:Yeah, I just recently sold some land up in the northwest part of the state and you know a lot of that land is running for $2,000, $2,200, maybe $2,500 an acre. Some is a little bit higher than that. So that's. You know. If you could have a deduction of $500 to $1,200 an acre, that would be really powerful on some of those land purchases.
Speaker 3:And while we're talking about land prices, people ask well, where was this? How come I've never heard of it before? And I do think a lot of it has to come with is you know previously, like I'd mentioned, this ruling was put in for the IRS tax law in the 60s, and so what was land prices back then? Significantly lower. I mean, they were still probably high for the times. But you're seeing, I think this come to light a lot more because of the benefit to the producers, but also with the going of the land prices Not just, you know, crop land, we just talked about pasture land being really, really high. And so I think a lot of these producers are people are digging into this ruling and be like, wow, this can be beneficial for us and we need to buy the 80 acres right next to the farm because that came up for rent.
Speaker 3:Or you see families fighting after mom and dad die, the land goes to sale. How does the brother buy the land back? You know this helps the guys that are truly the farmers, the ranchers trying to purchase land for their next generation, or even the young guys that are trying to get started, because that is very, very hard to do. You don't see very many small, you know young kids stepping into farming and ranching without dad, mom, grandpa's help, and so this is another, you know, way for young kids to continue to farm and to live that lifestyle.
Speaker 2:I agree, and I think that's a great point. You know, when I am selling land with drain tile on it, of course the first thing that you care about. When it has drain tile on it, or irrigation is on drain tile. You care that the water is there and so you can produce a bigger crop, or that you care if it's irrigation, that you can produce a bigger crop because it's adding the water that's necessary. But number two is how much you can deduct it, and so this might be the next wave of interest on these land purchases and you're right, that might put that competitive advantage to those people that understand that process and understand that, and so I really encourage people to talk to you, talk to their tax professionals, and really get a full understanding on that so they can take full advantage of it. So we have another question on here. It says I think we actually talked about this, but I'll read it anyways I inherited land last year that hasn't been tested in a while.
Speaker 2:We been just renting it out. Can I still do anything with the nutrient value? So well, it's a couple things on package. So inherited land does that qualify inherited?
Speaker 3:land qualifies yes okay, but gifted does not gifted does need to have a basis in the land okay, so people are hearing that basis.
Speaker 2:it has to has to be on the land. Okay, so people are hearing that basis. It has to has to be on the land. So when you inherit it, you have a typically a stepped up basis depending on the situation and and that would qualify. So it hasn't been tested in a while. Well, obviously you got to get it tested and put the numbers on to with the, the date that you inherited it, right?
Speaker 3:Correct.
Speaker 2:Yep, okay, I've been renting it out. Can I still do? I still do, okay. So I think we kind of answered the things there. So again, those are great, great questions and I encourage people to call steph and arthur companies and get that stuff figured out another question, I guess steve, while we're talking about that is so say, dad is the landowner uh-huh and and he does the section.
Speaker 3:He does a section 180. He purchased the land in 2024. He does section 180 now and in and he does the section. He does a section one 80. He purchased the land in 2024. He does section one 80 now and in five years down the road he passes away and his son inherits the land and he's an active farmer. He also can take advantage of section one 80 as soon as he inherits it. So it's not just a one and done deal. If dad did this um kind of like easements, like oh, dad got the easement money and now I'm inheriting this land Like that money's gone, that doesn't. It doesn't matter here.
Speaker 2:It's if, as soon as land changes hands, the next taxpayer follows your social security number can can apply for section one. Yeah, it's kind of like buying a tractor too, right? I mean, if you uh, obviously, if it's gifted to you it's different, but if you, uh, if, if I owned a tractor and I sold it to you, I took the deduction and now you guys bought it, now you guys take the deduction and so that asset can have multiple deductions. That's really interesting. Anything that people should look out for in the process so they don't get totally overwhelmed.
Speaker 3:I guess, just looking out for the processes, one thing is the value associated with the deduction goes with you for your basis, so that follows with you. People are like what's the catch? Well, I guess you could say that's the catch, that value goes with you. Again, crp acres don't apply until it comes out of CRP. Then you could run the evaluation on those acres Gifted does not, inherited does, newly purchased does. And so if you purchase land longer than the last five years, it's just going to take a 3115, which allows you to kind of do your catch up appreciation. You know it'd be like you forgot to depreciate an asset out back then. Now you fill out a 3115 form, your CPA will fill that out for you. So if you had purchased land you know longer than three to five years and you.
Speaker 3:And you still have a good benefit, or you wanted to amortize it out, that's still an option for you.
Speaker 2:Awesome, awesome. Well, we ran out of time here as we wrap up this week's episode. A huge thank you to Steph Scherbinski and Arthur Companies for sharing their knowledge on this. This is a really complicated topic. You made it really easy to follow. It really easy to follow. I want to thank you for that. Make sure you reach out to them. And again I want to thank Pifers for sponsoring this show. You know, come back next week and listen to the next episode. But again, go back and listen to all of this and I want to thank everybody for listening. Have a great week.