Selling a combine or a cow herd: how Form 4797 treats it
The same sale can be ordinary income or a capital gain depending on what you sold and how long you kept it.
When a farm sells equipment or breeding stock, the sale usually goes on Form 4797, not Schedule F. That matters, because part of the gain may be taxed at lower capital gain rates.
Livestock
Cattle and horses held for breeding, dairy or draft use for at least 24 months qualify for Form 4797. For other livestock the holding period is 12 months. Animals raised for sale stay on Schedule F.
Equipment
Depreciation you took on a machine comes back as ordinary income when you sell it for more than its depreciated value. Only the gain above the original cost can be a capital gain.
General information about federal and Kansas tax rules, not advice for your situation. Rules change; talk to your preparer before acting.
