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| I know that in Minnesota they've been challenging returns that use excess fertility as deductions. Basically, it comes down to there's no scientific way to prove that there is in fact excess fertility, and what the dollar amount is there. Every piece of ground is different and fertility is built over many years. It would be more defensible if the previous landowner had fall applied fertilizer, had a change of heart over the winter and sold the land. Then the value of that fertility is much more plausible and quantifiable. What's it supposed to be compared to, the average piece of farm ground or what ground that's never been broke up would have? Let's go another step further. Let's say you buy a quarter of ground that had corn on it in the year you buy it. Let's say you bale up all of that corn and remove the stover. If you bought the stover from your neighbor, you could expense that. Could you expense the value of that stover on the purchased land? What if it had cover crop seeded into it? Can you expense the cost of cover crop seed and application? Not to open a can of worms here, but if you can do one, it should be fair game to do all of these. I'm not saying it's wrong, but this is the territory we're in here.
But yes, people do it. A lot of people do it, and the IRS hasn't squawked about it too much. Not to scare anyone away, but my thought on it has been it'd be tough to defend if the IRS decides to audit you. Look into it, don't be afraid to do it, but you better have the tests and studies done and be prepared to fight for it if the IRS calls you. | |
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179 Question re: Land purchase
