The used machinery market is still red-hot, even when it comes to older equipment. While the price floor is pushing up the values of low-hour, late-model equipment, the marketplace is also displaying strong support for older equipment, which is enjoying brisk sales at auction.
“Most surprising are recent prices in tractors 15 years and older that are showing great care, good tires, and a pedigree,” says Scott Steffes of the Steffes Group (steffesgroup.com).
The rising tide of values is also lifting the prices on implements, especially tillage equipment this winter.
The widespread availability of internet sale sites — allowing farmers to list equipment online without having to transport that equipment to an auction lot — has opened up opportunities for farmers to generate cash to help put the crop in or underwrite the purchase of new machinery.
You don’t want to get rid of every piece of equipment that’s been a special part of your life story, such as Dad’s tractor, says Mark Stock of BigIron. “Heck, I’ve got a couple old tractors sitting in my shed too,” he adds. “But understand sentiment and emotion may overwhelm your ability to make logical decisions about your equipment inventory.”
One option to sell unused equipment would be through a private treaty, eBay-style online auction where you list that equipment with a photo and description, then set a time limit in which you want the iron to sell. Such sites include fastline.com, ironplanet.com, ironsearch.com, and tractorhouse.com.
Some of the hottest marketplaces for machines are online auctions such as bigiron.com or steffesgroup.com that send representatives to your farm to take pictures and write a description of the equipment, which is then posted on their site. Your contact information is also listed for potential buyers if they have questions about the machinery.
The equipment is then sold at auction on a specific date. After the sale, the online auction company pays you directly, minus any seller fees. The buyer is responsible for arranging for the equipment to be picked up from your farm.
You are responsible for all sales taxes on such a transaction, although new and used farm machinery is exempt from sales taxes in many states. Ask your accountant or check with your state’s department of revenue if you have any questions about sales taxes.
Be mindful of potential taxes on depreciation recapture. For a seller, a large amount of recaptured depreciation and capital gain may arise from the sale of machinery, especially if some assets have an adjusted tax basis of zero (that is, they are depreciated out).
In the case of selling machinery, the recapture of depreciation is ordinary gain, not capital gain. The difference is that ordinary gain is taxed at whatever tax bracket the taxpayer falls into.