Cattle Farm?

[quicksam]

I have a client who has purchased a large group of cattle to raise and resale. He also bought a few bulls for the herd.

I believe that I need to depreciate the bulls, and add the cost of the other cattle to inventory? Is my thinking correct?

My only question is to the feed and other expenses. He had $6242 in feed for the year. Do I expense this even though no income was generated from sales? Or do I add it to the cost of inventory?

The bulls were eating part of the feed also, so how would I prorated it between them and the resale cows?

Thanks

[thomtax]

Expense

An analogy for my thinking. If you open a storefront, you will pay rent and utilities. Since you are a cash basis taxpayer, you will expense them even though the first sale is not made until January 3 of the following year. To me it's the same for the feed.

LT

[RitaB]

Depreciate the animals used for breeding

I have a client who has purchased a large group of cattle to raise and resale. He also bought a few bulls for the herd.

I believe that I need to depreciate the bulls, and add the cost of the other cattle to inventory? Is my thinking correct?

My only question is to the feed and other expenses. He had $6242 in feed for the year. Do I expense this even though no income was generated from sales? Or do I add it to the cost of inventory?

The bulls were eating part of the feed also, so how would I prorated it between them and the resale cows?

Thanks

Depreciate any animals (both male and female) used for breeding purposes. Get details, cause he will probably sell some of these someday anyway, and you'll need to use Form 4797, (Part III, if I remember) to report the sale(s). Expense the feed.

My new "farmers" get read the riot act about hobbly losses, but it sounds like your guy is really conducting a business. Congratulations. Haha!

[travis bickle]

You may need to curl up

with a few pubs on depreciation. If I remember correctly, farm depreciation is different than "business depreciation".

Don't forget all the other "odd" expenses - vet, county fair stalle, etc.

[Larmil]

with a few pubs on depreciation. If I remember correctly, farm depreciation is different than "business depreciation".

Don't forget all the other "odd" expenses - vet, county fair stalle, etc.

You should also get Pub 225 - Farmer's Tax Guide

[JG EA]

There is an exception for feed/hay. If you have amounts left over, you are supposed to hold the cost until used. (Like prepaid rent.)