I should just dm you but you dealt with the farmland with fertilizer allocation at all?
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- Thread starter Throwin bones50
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The most common issue I have clients need help with is pre-paid inputs for the next year, farmer is deducts them for current year... BUT then the next year comes and farmer never ends up using pre-paid pre-deducted inputs. (typically due to lease termination or death)
What issue do you got going on?
Fairly new. When you buy farmland you can allocate a certain amount to residual fertilizer in the soil now. Small percentage of the purchase but still a big number. There are places out there doing the testing and calculation. I don't mess with that part.
The issue is how far to go back. These companies will calc it back 20+ years if you have the records of what fertilizer went on. Easy answer is amend up to 3 years. Deduct in the year of purchase.
Potentially it's an accounting change. Go back however far company calculating will go. File a 3115 and amortize the cost over 3-5. Which in most cases is all caught up in current year.
My issue with the 3115 logic is amortizing it as a cash basis farmer doesn't really make sense. If I wasn't going backwards I wouldn't. It's inconsistent with what I would do year to year so piss poor logic to do it going backwards.
Have a farmer that's bought land nearly every single year so they would have millions going on that 3115. Certainly others that would be able to go back but a couple that would be really significant numbers.
All this tax talk is making me frisky. I think I get the allure of accounting now.
1) what type of ground?
2) nobody has maxed out the deductions on the inputs on the ground yet?
3) I know you said your client is a big baller but realistically I wouldn't go too far back because you quickly cross into tail wag the dog scenario where the effort and risk isn't worth the reward.
4) look at you Jimmy boy, big baller whale farm client som'bitch 🤑
Row crop, pasture, doesn't matter.
Doesn't matter. Logic isn't any different than fencing or other improvements on the land. Allocate land, fencing, tiling, and residual fertilizer to the overall purchase and expense/depreciate accordingly.
This is where I'm at right now. Trying to get an idea if anyone else is rolling the 3115 dice. Rather wait until there's more case law around it. Bad part is each year that goes by a land purchase X years ago falls off. That's a 6 figure deduction every time. The company doing the calculation has been audited a few times already and passed. No audits/cases where someone has used the 3115 approach yet that I'm aware of.
Boa Safra Ag is the company. If you have anyone buy land the closer to time of purchase the better. There's others out there I'm sure. Just the one I've seen used the most often.
Do we start talking yields yet?
any advice on investing your HSA?
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