Discussion:Clam farmer

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Basic Tax Questions --> Clam farmer


Discussion Forum Index --> Tax Questions --> Clam farmer

Olycraig (talk|edits) said:

5 February 2011
New S Corp client, harvested geoduck clams this year. Spent $40,000 for "seed" for the next crop, which will mature in about 5 years. Can they deduct the "seed" currently?

Captcook (talk|edits) said:

5 February 2011
It is inventory. I'm working on the same type of return (Geoduck farmer) right at the moment.

Olycraig (talk|edits) said:

5 February 2011
Thanks. I think I see that 263A doesn't apply to animals, right? So just the initial purchase becomes inventory, planting costs, tubes, etc can be expensed?

Captcook (talk|edits) said:

5 February 2011
ยง263A(d)(1)(A) does provide an exception for animals. Geoducks are clearly not plants, so you make the call there. My client is required to be on the accrual method, so this exception does not apply.

Olycraig (talk|edits) said:

5 February 2011
This is a small S Corp, so it can use Cash method. What requires them to record inventory, rather than expensing the seed cost? That's my real question. Rev. Rul. 76-241 says that oyster farmers must use inventory if they are accrual method, (we are not) but that is just in keeping with Reg. 1.61-4(b) which says that all accrual farmers must use inventories. By distinguishing accrual basis, does that ruling imply that a cash basis farmer could expense the cost?

Reg. 1.162-12(a) says if we don't compute income upon the crop method, "the cost of seeds which are purchased for further development and cultivation prior to sale in later years may be deducted as an expense for the year of purchase." So why must we use inventory for clam seed purchases?

Olycraig (talk|edits) said:

7 February 2011
I found a good but dated resource in a 1986 treatise on Oyster Growers by Harrison Lauer, U. Pitt Law Review. He raises similar questions, but is light on conclusions, and I'm not sure what may have changed since then. Any farm tax experts out there?

To join in on this discussion, you must first log in.
Personal tools