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Hello JA Customer,
The expenses you incurred to clear this land cannot be expensed. They simply add to your basis in the land.
If and when you eventually sell this land, your increased basis would be used in determining the amount of any gain you have from the sale which would be subject to tax, so you will realize a tax benefit at that time by being able to used the increased basis.
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Your answer required no imagination. I am not a tax expert but even I know land is normally a capital asset.
I qualified the situation by identifying the land as necessary for farming business to continue and the land purchased has no value for any other use.
I am looking for some consensus that it might be a valid argument to present to a tax auditor if questioned
Hello again JA Customer,
I'm sorry, but I prefer not to provide you with answers that include using your imagination. I provide you with answers that are in accordance with the law.
Land itself is not even allowed to be depreciated by the IRS as other assets are. And so improvements made to the land will not be allowed as an expense. Typically improvements made which have a useful life of one year or more are not considered to be expensable items. It does not matter that the land services no other purpose or has any other value to you.
I will certainly put your question back on the open board to see if there are any other tax experts here who may provide you with a different answer or opinion. If someone else posts a response, you will receive an email notification.
In the meantime, simply do not Accept this answer until you receive one that you are satisfied with. Also please do not respond again to this question as it will just put the question back in my que to be addressed rather than leaving it open for other tax experts to review.