The Bottom Line
INVESTMENT OPPORTUNITIES TAX ADVANTAGES
Are there tax advantages to owning and raising
You bet there are! There are two ways of investing in alpacas. The active, or hands on method, where you actively raise your animals yourself for profit, and the passive, or agisted method, where you invest in the animals and someone else does the farming.
As a breeder you can depreciate a male or female alpaca used for breeding purposes over a five-year period. Breeding animals are considered a capitol asset. Furthermore, the first year that the capitol asset is acquired, there is a hyper depreciation of $100,000 which can be used as a business expense item. (See IRS Publication 225 section 179). In addition, production animals or equipment purchased in excess of this deduction can be depreciated over five years. Income derived from the sale of capitol assets is usually taxed at a lower rate than that of income derived from other sources, such as regular earnings. Any expenses, which you incur, such as veterinary care, feed bills, or any other costs associated with the raising and marketing of your alpacas, are deductible. As an active breeder there is also the ability to depreciate tangible property, such as barns and fences, as well as breeding stock to be considered.
Your alpaca farm may generate taxable losses that may be used to offset taxable income from other sources. Alpaca breeding is an excellent way to accomplish tax-deferred wealth building. The small farmer or investor can purchase several alpacas and allow the herd to grow without paying income taxes on the increased value of that herd.
If you agist your alpacas your tax advantages will vary from that of an active owner, but they will still be very attractive. The main difference will be that you will hold all of your expenses incurred in the raising of the alpacas to be used as deductions against your profit until such time as you sell the alpacas.
This is only a short, and by no means complete, summary of
the tax advantages available to you as an alpaca breeder. The IRS publication
#225, The Farmers Tax Guide, is very helpful, also see::
Great News For Alpaca Breeders .
We strongly recommend that you consult an accountant or tax advisor who is
familiar with breeding livestock and farming issues.
You may be one of the many people who are thinking of alpaca ownership, but cannot afford, or do not desire, to invest a large amount of money to start. If that is the case the purchase of pet quality, or fiber animals, is a good choice for you. It will give you a way to "try out alpacas" without a large financial commitment. You may want to agist, or board, your alpacas with an established alpaca owner for a while. This will give you a chance to find out if the raising of these wonderful animals is for you and if the lifestyle that these animals give us is one, which you would enjoy. The fees are reasonable, usually only about three dollars per day and, of course, this would be a tax deductible expense. This will also give you the option of purchasing one alpaca at a time. Alpacas are herd animals and need to live with other alpacas, they can actually become very stressed if separated. That is why we strongly suggest the purchase of at least two if you are going to take them home to raise yourself.
Many spinners and weavers find that the purchase of neutered male fiber animals is the answer to their desire for fiber of their very own to work with.
Some people may want to purchase one or two animals as a way to accumulate the funds required for the college education of their children. The purchase of just two breeding females is a good start toward that end. Given a ten year period those two original females can very conservatively grow into a herd of thirty or more alpacas! Of course, you may want to purchase a male to use as a herd sire, or you can take advantage of the many herd sire animals available for a stud fee. Again, if you dont wish to take on the task of breeding your own animals agistment would be an excellent option for you.
The purchase of alpacas for investment is always a personal decision and we encourage you to investigate fully the many options open to you. There is always a risk involved in the purchase of any kind of livestock and alpacas are no exception.
They are however, extremely hardy and easy to raise and they are 100% insurable for mortality and theft. Actually, we dont know of a better animal to invest your money or your love in! Investing in Alpacas is a decision which can change your life for the better!
Can you make money raising and marketing alpacas?
That is always the bottom line question. It is often said that "Alpacas are the worlds finest livestock investment" for a very good reason. The worldwide demand for alpacas and their fiber has been strong and has continued to increase yearly. The demand for the animals exceeds the supply. They produce only one cria a year so the population of alpacas increases slowly. Importation from South America is limited by difficulty of regulations and quarantine, cost, and the strict guidelines imposed by the Alpaca Registry. A situation where demand is high, coupled with a restricted supply creates a market for alpacas where prices are high and stable. It is commonplace for the female offspring of an alpaca to sell for the same price as the investor paid for the dam. Male offspring, if they are of herdsire quality, can bring several thousands of dollars more than the dam. The alpaca business is not a get rich quick business. It takes work and dedication just like any other business, but yes there is profit to be made in this wonderful business. By the way, can you think of another business where your investment can be one hundred percent insured?
Will prices stay at their current levels?
The alpaca market has been stable for 20 years and we expect prices to stay stable for many more years. Demand for quality breeding alpaca stock has never been higher. We have a strong registry in the Alpaca Registry Inc. (ARI) and an equally strong national marketing organization in the Alpaca Owners and Breeders Association (AOBA). We in the industry are working to improve our textile market and as the demand for more fiber increases the demand for more alpacas will also increase. We are confident that the alpaca industry will remain healthy and viable.
Is financial gain the only reason people invest in alpacas?
It is our observation that people invest in alpacas for two reasons. One is the financial investment, and the other is for the lifestyle investment. There is not another business that we know of that can offer such a good return on your investment while affording a lifestyle that is so satisfying to the soul. Raising alpacas is not just the investment of a lifetime, its an investment in a lifestyle that your whole family can participate in.
Is it for everyone?
No it isnt for everyone, but if you think it is something that you would enjoy, if you love the animals and want to be part of one of the most dynamic livestock businesses in the world and still be able to keep in touch with the basics of life, then it could be for you.
" We can make your dreams of alpaca ownership a reality! "
Dick and Debbie McCoy
10877 Slayton Road Cato, N.Y. 13033
Tel: (315) 626-2672
Toll Free 1(866)-731-1249
Copyright 1996 - 2007 Ó by Foxrun Farms Alpacas All rights reserved.