Buy a new sprayer or go used?

Typically, year-old applicators would be in short supply compared to those two to five years old, but the marketplace is inverted these days for two reasons.

Manufacturing of sprayers in 2020 and 2021 was limited by a severe short-age of components, and sprayer purchases were light before 2020 due to depressed commodity prices.

Last year, manufacturers figured out work-arounds for the component shortages and began turning out more applicators, which has strengthened the number of 2022 model year applicators on the market at press time.

One consistency in self-propelled applicators is their tendency to be feature-rich. As we explored the most popular 2022 John Deere models (410R, 412R, 612R, and 616R with the 410R winning the popularity contest), the abundance of options and accessories become obvious. Rare was the listing that could be considered pared down.

Today's applicators are purchased with a dizzying array of options such as upgraded lighting (including LED boom lights as seen in the applicator, left), three boom widths, traction control, hydraulic tread adjustment, boom air purge, direct chemical injection systems, five-way nozzle bodies, automatic boom leveling, deluxe cabs, and electronics packages that offer automatic control of all major sprayer functions.

All these additions certainly influence dealer asking prices, accounting for the differences shown in this Price Guide, where we feature a spread of self-propelled applicators listed from the highest- to lowest-priced offerings.

The prices vary, but hours of use were fairly consistent. Most of the listings in the Price Guide fall into the range of 250 to 500 hours.

However, if you are in the market for a 5- to 8-year-old applicator, the good news is that sprayers of this age are in decent supply at dealer and auction lots. True, the tight supply of new and late-model applicators has eaten into the older used inventory in the past two years, but sprayers of this age, in good condition with moderate (2,500-plus) hours, can be found if you invest time surfing the internet.

In that regard, prime online searching sites include machinefinder.com (John Deere dealers' site), caseihused.com, tractorhouse.com, and machinerytrader.com. If you are interested in buying from a dealer outside your area, it is highly recommended that you work with your local dealer to complete the transaction. Besides the benefit of the dealer's ability to make arrangements for transportation, the good will you generate from working with your dealer will pay off when that sprayer needs support or repair down the road.

Equipment Traders Are Treated as Taxable Events

If you are exchanging equipment, even if it involves a purchase leaseback, consult with your accountant to see whether that transaction creates a tax liability. Tax law changed in 2019, making it necessary to "sell" an old asset for the trade-in value and put the new asset on the depreciation schedule at its full market value, says Tina Barrett of Nebraska Farm Business. This can generate significant taxable income. "You'll want to make sure you have planned on the recognition of this sale. For many operations, this could be hundreds of thousands of dollars in new gain," she says.

Tax regulations preserve like-kind exchange treatment for real property, but eliminate it for personal property. "Equipment or livestock 'trades' will be treated as taxable events, with the taxpayer computing gain or loss based upon the difference between the amount realized on the sale of the relinquished asset and the party's adjusted basis in the asset," adds Kristine Tidgren at Iowa State University's Center for Agricultural Law and Taxation. "The amount realized includes any money as well as the fair market value of property (other than money) received in the transition."

To help explain this confusing set of rules, Tidgren offers an example.

"Suppose Sam trades a tractor, with a fair market value of $75,000 and an adjusted basis of zero dollars, plus $50,000 cash for a tractor with a fair market value of $125,000. For that tax year, this transaction will be treated as a sale and a purchase.

"Sam must now recognize $75,000 in recapture [the difference between the fair market value of the traded tractor at $75,000 and its adjusted basis of $0]. This transaction will be reported on Part III of Form 4797 and taxed as ordinary income [no self-employment tax]. Sam uses the proceeds of the sale plus an extra $50,000 in cash to purchase the new tractor.

"Thus Sam's basis in his new tractor will be $125,000, the full purchase price of the new tractor. Sam can likely expense this amount. If Section 179 is not available, he can use 100% bonus to capitalize and depreciate the full amount."

More than ever, your tax accountant or adviser will be a significant business partner to help you work your way through the tax consideration, Tidgren says.

According to the IRS, anyone buying, financing, or leasing new or used equipment will qualify for a Section 179 deduction, provided the total amount is less than the yearly cap. For farmers, that typically means equipment, machinery, tools, and software purchased between January 1 and December 31.