866-651-SURI (866-651-7874)  8395 Number Nine Road Brookville, Oh 45309

Why Invest in Alpacas?                Click to the right for R.O.I. Scenario             

Why are alpacas so valuable?  There are small numbers of them.  Somewhere around 75,000 animals in the U.S. and there is no more importation allowed.  The alpaca registry provides a means of low cost DNA verification coupled with a strong breeder's association that promotes awareness and education, has kept prices stable for over 25 years.  In the U.S. we have alpaca ranches in almost every state and the national herd is growing by about 22% a year, according to the Alpaca Registry.  In July 2000, there were over 29,000 registered alpacas and the number of owners had grown from 146 in 1991, to 2,919 by 2000.  The scarcity of alpacas is based on their slow rate of reproduction.  Usually females give birth to one baby at a time with a gestation period of 11 months.   Because of this slow reproductive rate, it will take a long time to drive the price of breeding stock down and top animals will always bring top dollars.  Importation of alpacas from South America is difficult, expensive due to quarantine restrictions, and the Alpaca Registry has been closed to new imports since December 31, 1998. 

Tax Advantages?  An attractive advantage to raising alpacas is the very generous tax benefits. Along with potential profits from the sale of fleece and offspring, if alpacas are actively raised for profit, all the expenses of the business can be written off against your income.

Expenses would include feed, fertilizer, veterinarian care, etc., and depreciation of tangible property such as breeding stock, barns and fences. These expenses can also help shelter current cash flow from off farm income from tax.  Improvements to facilities are not only deductible expenses, but increase the real value of your property.

A small farmer or land owner can purchase several alpacas and allow the herd to grow over time without paying income tax on its increased size and value. In contrast, for an investment in a CD, interest earned during the year would be taxable. In addition, the CD could not be depreciated.  Raising alpacas may also qualify your land for agricultural property tax deferral. 

An alpaca can typically be depreciated over a five-year span or 20% per year and, in addition, the 2008 Economic Stimulus Bill changed Section 179 of the tax code to allows for the deduction of a capital asset up to $250,000 for assets up to $800,000 put into service in 2008.  Additionally, businesses are now allowed a 50% bonus depreciation on assets placed in service in 2008. 

Economic Stimulus Act of 2008 Tax Incentives

Business owners can elect to expense up to $250,000 (increased from $128,000) of qualifying property (up to $800,000 in value) instead of taking depreciation for assets put into service in 2008.  Alpacas are assets.

Businesses are now allowed a 50% bonus depreciation on assets placed into service in 2008.

Here is an example of how these new tax benefits can be calculated:

A $500,000 asset is placed into service in 2008 

$250,000 may be expensed under Section 179 

$250,000 remains to be depreciated 

A further $125,000 may be expensed as Bonus Depreciation (50% of $250,000) 

Asset now has a $125,000 base from which to take standard 1st year depreciation 

For this example we'll assume 5-year property = $25,000 1st year depreciation 

Total deduction in 2008 is $400,000 on the asset 

Remaining $100,000 cost of the asset is recovered under the otherwise applicable rules for computing depreciation

 

A Protected Investment?  Compared to the stock market, the alpaca market is similar in the following ways:

(1) They are subject to capital gains taxes, if held a required amount of time.

(2) They can both be traded as tax-free exchanges.

They are, however,   different in many more ways: Alpacas

(1) Are an insurable investment

(2) Are tax depreciable over a five-year period

(3) Make their owners eligible for a section 179 deduction,  a small business deduction for capital assets

(4) Offer a lifestyle which is both peaceful and profitable.

The Stock Market, doesn't offer any of these benefits.  If you breed and raise your alpacas on your own property, your land is usually taxed at much less as a farm than it would be ordinarily, stocks don't lessen your land tax burden.  If your stock splits on the market, you have more stock that is worth the same amount of money as before.   If your alpaca dam has a cria (baby), your have two alpacas that can be worth twice as much.   Through careful breeding, you can increase the value of the offspring of your starter stock.  There is nothing you can do personally to make a stock go up in value.  When you own your own alpaca herd, you are in control.     We encourage potential alpaca purchasers to consult with their own tax consultant on any investment considerations.  

Maximum Return on Investment.  Our philosophy is simple;   Tri-Valley's alpacas are carefully hand-picked and bred to the males whose bloodlines, confirmation and fiber characteristics ensure that you end up with the best cria possible for the highest return on your investment.  You don't have to spend a fortune to make a fortune.

 

 

 

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