These arrangements are predicated on a trusting relationship between parties and requires planning to ensure timely harvest. Custom Farming For individual producers who are close to retirement, need to upgrade their line of equipment, but do not want to make a major capital investment, they might want to consider custom farming. Costs for these operations can be calculated using per implement custom rate values or a complete per-acre change. Advantages include less capital investment, not having to do repair work, and more free time to plan and market. Any remaining depreciation on the gifted machinery passes to the receiver of the gift.
Caution needs to be observed when gifting machinery with remaining debt.
The remaining debt is considered income to the giver of the gift and subject to income tax. Producers need to weight all advantages and disadvantages when evaluating the many methods of acquiring equipment. Financial as well as nonfinancial issues must be thought through. Producers need to enlist the help of their accountant, attorney, and creditors as well.