When a proprietor who also does farming has a loss of goods (freezer went out), I'm thinking he can deduct all costs associated with that, but NOT the loss of sale of that item, or loss of profit. Am I missing something?
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If I'm understanding your question
You're not missing anything because you can't deduct something you didn't receive. If they would have sold the freezer full of food they would have made a profit of $1,000 - but because the freezer went out they will now have a profit of Zero, Zero is what is included in income Zero is what you deduct.
If they want to add the pretend $1,000 into their income they can turn around and deduct the $1,000 loss which nets out to Zero.
They will be able to deduct what the cost of the meat or the cost of what they loss but that's it. -
Not missing anything at all-that would be double dipping. He hasn't included the sale in income so he can't deduct the "loss of sale" from it. You are correct, he can deduct the costs.Comment
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He has already deducted his cost associated with growing the products.
Similar to a cattle farmer. They always want to deduct the value of the raised calf that died. I tell them that they already deducted the feed, vet bills, and overhead expenses with raising that calf.
This assumes the cash basis of accounting.Jiggers, EAComment
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Thanks everyone, good to have 2nd opinions when TP will not like what we say!
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