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Farm Income Expense - Feed Purchased

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Question
Farm Income Expense - Feed Purchased

Answer

If you use the cash method, you cannot deduct when paid the cost of feed your livestock will consume in a later year unless all of the following apply.

  • The payment was for the purchase of feed rather than a deposit.
  • The prepayment had a business purpose and was not made merely to avoid tax.
  • Deducting the prepayment will not materially distort your income.

If all of the above apply, you can deduct the prepaid feed when paid, subject to the overall limit for Prepaid farm sup-plies explained earlier. If all of the above do not apply, you can deduct the prepaid feed only in the year it is consumed.

 


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Views: 1116 Created on: Jun 15, 2013
Date updated: Sep 17, 2015

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