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Rolla, ND | If you use the depletion method of figuring fertilizer costs you better not be expensing fertilizer out as a cash cost. Here's the thing. You bought some fertility with the land, but let's say you are claiming to be using it, that is depleting it. What are you doing to document that. Are your soil tests going to go down? How do you show that you used the fertilizer in the soil and not the fertilizer you bought and expensed? You can't deduct twice for expenses. Note also that depletion will lower your basis in the land. If the residual value of the land doesn't go down, then you have nothing to claim for depletion.
In other words, if you get an auditor that wants to get some money, and claiming depletion, you will be audited, you have to show that you actually depleted it. Or else get ready to pay those taxes you "saved" with at least interest added.
It would be different if you mined phosphorus or were cutting off the trees or something but taking the depletion for the fertility of the land is very grey at best because most people won't actually let it deplete, it's bad for production. | |
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interviewing a new tax guy. what to ask, when to switch?
