Chapter 14
The four types of farm business organization.
What are sole proprietorship, partnership, corporation, and limited liability company?
The five types of risk.
What are production and technical risk, price and market risk, financial risk, legal risk, and personal risk?
The three types of taxes imposed on farm income.
What are ordinary income tax, capital gains tax, and self-employment tax?
An advantage of a partnership
What is cheaper to form, easier to form, and flexible to form?
Tools for managing production risk.
What are stable enterprises, diversification, property insurance, crop/revenue/livestock insurance, extra production capacity, share leases, custom farming and feeding, and input procurement?
The two tax accounting methods.
What are the cash method and the accrual method?
The type of business organization that terminates on death.
What is sole proprietorship?
Definition of diversification.
What is producing more than one product to avoid having income depend totally on the production and prices of a single commodity?
The advantages of cash method tax accounting.
What are simplicity, flexibility, capital gains from the sale of raised breeding stock, and delaying tax on growing inventory?
A disadvantage of a corporation.
What is more costly to form, more legal fees and advice necessary, an accountant may be needed, shareholders and directors meetings required?
Tools for reducing financial risk.
What are fixed interest rates, self-liquidating loans, liquid reserves, credit reserve, and owner equity?
The advantages of the accrual tax accounting methods.
What are more accurate measure of income, reduced income fluctuations, and later tax payments with declining inventory?
Stages of transferring a business.
What is the testing stage, followed by either separation and spinoff, transfer and takeover, and expansion and joint operation?
The steps for decision making under risk.
What is 1) identify a possible source of risk, 2) identify possible outcomes, 3) list alternative strategies, 4) quantify the consequences or results of each outcome for each strategy, and 5) estimate the risk and expected returns for each strategy and evaluate their trade-offs?
Tax management strategies.
What are form of business organization, income leveling, tax credits, income averaging, deferring or postponing taxes, net operating loss, and tax-free exchanges.