Deducting Excess Soil Fertility
A purchase of farmland may allow you to deduct the excess soil fertility. However, there is very little guidance on this deduction from the IRS.
In today’s blog post we provide an audio webinar on the ability to deduct excess fertilizer when purchasing or inheriting farm property.
The audio recording reviews the rules and the lack of guidance from the IRS on this deduction.
Also, a farmer who purchases land from their landlord and has been deducting the fertilizer as they farm the land is not allowed to do this deduction. It is only when you purchase land that you did not farm that you can deduct the excess fertility.
You are required to be a farmer, so a cash rental landlord also cannot take this deduction.
Excess fertility is eligible for 179 expense deduction, which makes the 3 year amortization irrelevant.
You stated that "It is only when you purchase land that you did not farm that you can deduct the excess fertility". Do you have any support reference for this statement? Just would like something to reference or any additional info you could provide on this would be great. I read the TAM and didnt see anything in there about that. Thank you!