Impact of the Section 179 tax deduction on machinery investment

Joleen C. Hadrich, Ryan Larsen, Frayne E. Olson

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

Purpose – The purposes of this paper are to determine the financial, structural, and tax policy factors that influence the probability of buying machinery and the intensity of the machinery purchases on North Dakota farming operations. Design/methodology/approach – A double hurdle model was used to estimate the two decisions: purchasing machinery and the intensity of the machinery purchase. Data were collected from the North Dakota Farm and Ranch Management Business Association Annual Summaries for 1993-2011. Findings – Results demonstrated that the tax incentive provided by Section 179 deduction had the largest positive effect on machinery purchases when compared to operating profit margin, leverage ratio, producer type, and experience of the principal operator of the farm. Originality/value – Section 179 deductions have changed substantially over the 19-year period studied and have not been analyzed in previous machinery investment work. This analysis puts a numerical value on the effect of Section 179 deductions over time and demonstrates the large effect tax incentives have on machinery purchase decisions and levels.

Original languageEnglish (US)
Pages (from-to)458-468
Number of pages11
JournalAgricultural Finance Review
Volume73
Issue number3
DOIs
StatePublished - Nov 4 2013

Fingerprint

economic incentives
Taxes
taxes
purchasing
farm operators
business management
Motivation
ranching
profits and margins
farming systems
Agriculture
farms
Tax deduction
Machinery
methodology
Farms
Deduction
Purchase

Keywords

  • Double hurdle
  • Machinery investment
  • Tax incentives

Cite this

Impact of the Section 179 tax deduction on machinery investment. / Hadrich, Joleen C.; Larsen, Ryan; Olson, Frayne E.

In: Agricultural Finance Review, Vol. 73, No. 3, 04.11.2013, p. 458-468.

Research output: Contribution to journalArticle

Hadrich, Joleen C. ; Larsen, Ryan ; Olson, Frayne E. / Impact of the Section 179 tax deduction on machinery investment. In: Agricultural Finance Review. 2013 ; Vol. 73, No. 3. pp. 458-468.
@article{4d73c618afe44b519cfbd7c7e991be31,
title = "Impact of the Section 179 tax deduction on machinery investment",
abstract = "Purpose – The purposes of this paper are to determine the financial, structural, and tax policy factors that influence the probability of buying machinery and the intensity of the machinery purchases on North Dakota farming operations. Design/methodology/approach – A double hurdle model was used to estimate the two decisions: purchasing machinery and the intensity of the machinery purchase. Data were collected from the North Dakota Farm and Ranch Management Business Association Annual Summaries for 1993-2011. Findings – Results demonstrated that the tax incentive provided by Section 179 deduction had the largest positive effect on machinery purchases when compared to operating profit margin, leverage ratio, producer type, and experience of the principal operator of the farm. Originality/value – Section 179 deductions have changed substantially over the 19-year period studied and have not been analyzed in previous machinery investment work. This analysis puts a numerical value on the effect of Section 179 deductions over time and demonstrates the large effect tax incentives have on machinery purchase decisions and levels.",
keywords = "Double hurdle, Machinery investment, Tax incentives",
author = "Hadrich, {Joleen C.} and Ryan Larsen and Olson, {Frayne E.}",
year = "2013",
month = "11",
day = "4",
doi = "10.1108/AFR-07-2012-0035",
language = "English (US)",
volume = "73",
pages = "458--468",
journal = "Agricultural Finance Review",
issn = "0002-1466",
publisher = "Emerald Group Publishing Ltd.",
number = "3",

}

TY - JOUR

T1 - Impact of the Section 179 tax deduction on machinery investment

AU - Hadrich, Joleen C.

AU - Larsen, Ryan

AU - Olson, Frayne E.

PY - 2013/11/4

Y1 - 2013/11/4

N2 - Purpose – The purposes of this paper are to determine the financial, structural, and tax policy factors that influence the probability of buying machinery and the intensity of the machinery purchases on North Dakota farming operations. Design/methodology/approach – A double hurdle model was used to estimate the two decisions: purchasing machinery and the intensity of the machinery purchase. Data were collected from the North Dakota Farm and Ranch Management Business Association Annual Summaries for 1993-2011. Findings – Results demonstrated that the tax incentive provided by Section 179 deduction had the largest positive effect on machinery purchases when compared to operating profit margin, leverage ratio, producer type, and experience of the principal operator of the farm. Originality/value – Section 179 deductions have changed substantially over the 19-year period studied and have not been analyzed in previous machinery investment work. This analysis puts a numerical value on the effect of Section 179 deductions over time and demonstrates the large effect tax incentives have on machinery purchase decisions and levels.

AB - Purpose – The purposes of this paper are to determine the financial, structural, and tax policy factors that influence the probability of buying machinery and the intensity of the machinery purchases on North Dakota farming operations. Design/methodology/approach – A double hurdle model was used to estimate the two decisions: purchasing machinery and the intensity of the machinery purchase. Data were collected from the North Dakota Farm and Ranch Management Business Association Annual Summaries for 1993-2011. Findings – Results demonstrated that the tax incentive provided by Section 179 deduction had the largest positive effect on machinery purchases when compared to operating profit margin, leverage ratio, producer type, and experience of the principal operator of the farm. Originality/value – Section 179 deductions have changed substantially over the 19-year period studied and have not been analyzed in previous machinery investment work. This analysis puts a numerical value on the effect of Section 179 deductions over time and demonstrates the large effect tax incentives have on machinery purchase decisions and levels.

KW - Double hurdle

KW - Machinery investment

KW - Tax incentives

UR - http://www.scopus.com/inward/record.url?scp=84901309833&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84901309833&partnerID=8YFLogxK

U2 - 10.1108/AFR-07-2012-0035

DO - 10.1108/AFR-07-2012-0035

M3 - Article

VL - 73

SP - 458

EP - 468

JO - Agricultural Finance Review

JF - Agricultural Finance Review

SN - 0002-1466

IS - 3

ER -