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A CLIENT OF MINE IS A FARMER WITH CATTLE. PURCHASED ABOUT…

A CLIENT OF MINE IS...
A CLIENT OF MINE IS A FARMER WITH CATTLE. PURCHASED ABOUT $94,000 IN CATTLE FOR 2017, AND SOLD ABOUT $36501. IS THE BEST WAY TO HANDLE IT, A LOSS ON SCH F OR PRORATE THE PURCHASE THE CATTLE OR 3 YEARS, THEY ARE NOT FOR BREEDING. HE IS A CASH BASIS FARMER.
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Answered in 38 minutes by:
3/27/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,142
Experience: Taxes, Immigration, Labor Relations
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We need to verify - the cattle was purchased with resale purposes - that is accounted as inventory.

But if the cattle is held for production of income - that is business asset and may be depreciated.

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Customer reply replied 3 months ago
THE CATTLE ARE FEEDER CALVES, TO BE FED AND SOLD.

So - these are basically inventory...

The farmer may choose not to keep inventory - but it might be much clear to account for inventory.

If so - we will have COGS - schedule F - lines 45 - 49.

What are you trying to achieve?

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,142
Experience: Taxes, Immigration, Labor Relations
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Lev and 87 other Tax Specialists are ready to help you
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Customer reply replied 3 months ago
WE DIDN'T WANT SUCH A LOSS ON THIS YEAR'S TAXES AND THEN SHOW SUCH A GAIN NEXT YEAR. SO INVENTORY, IT IS. THANKS LEV. CAN ALWAYS COUNT ON YOU
Customer reply replied 3 months ago
HOW CAN I PUT THE CATTLE PURCHASED IN INVENTORY FOR THIS CASH BASIS FARMER?

In generally - we use accrual method for inventory.

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Customer reply replied 3 months ago
WOULDN'T WE HAVE TO GET THE METHOD CHANGED THROUGH THE IRS FOR THIS.

If the farmer specifically selected cash method for inventory - it might not worth to change.

But generally inventories are accounted differently and using accrual method.

If however cash method for inventory was their choice - that will be large loss for this tax year.

In this case you may do income averaging specifically allowed fro farmers.

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