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buy back on corn

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    buy back on corn

    I have a farmer who placed his corn in a buy back program. He sold it in "04 and
    purchased in back in "05. I believe it is correct to report it this way. Just
    double checking. All cash basis .

    #2
    I assume this is to take advantage of being able to deduct the COGS right away where costs may be greater than the value so that the farmer can hold the corn in inventory at a lower cost, betting the prices may go up later.

    I don't know of any rules that prevent a business from doing this with their inventory. However, if the corn was purchased and sold as an investment, I would think the wash sale rules under Section 1091 would kick in to prevent claiming a loss on the first sale. Section 1091(e) says the wash sale rules also apply to futures contracts, so the transaction would have to be structured in a way for that rule not to kick in.

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