Farm Question

[VanderBeaverHausen A.]

A farmer is claiming he can use his "feed" carry over.

Does this work like cost of goods sold if he buys it in December and then uses it the following year it gets deducted the following year.

Thanks

[cpadan]

The only special rule I can think of is to prepay his feed, maybe that is what he is talking about. See page 20 of the farmers tax quide
Dan

[Bees Knees]

TTB, page 5-29, "Prepaid farm supplies include feed, seed, fertilizer, and similar farm supplies that are not used or consumed as of the end of the tax year. If the cash method of accounting is used to report income and expenses, a deduction for prepaid farm supplies may be limited to 50% of the total other deductible farm expenses for the year (all Schedule F deductions except prepaid farm supplies)."

"Example: Ken bought $5,500 worth of fertilizer and feed in 2005 that will not be used until 2006. His other deductible farm expenses in 2005 total $10,000. Ken's deduction for prepaid farm supplies in 2005 cannot be more than $5,000 (50% of $10,000). The $500 excess is deductible in 2006 when the supplies are used or consumed."

It then goes on to list some exceptions to the rule.