For cash-method farming operations, what are the general rules for inventory?
Generally, the purchase price and other acquisition costs of the animals, and cost of seeds, plants, trees and vines with a preproductive period of more than two years must be capitalized, but the cost of raising animals and raising crops can be deducted when expensed. Special preproductive rules apply to timber and Christmas trees. When the farming operations are part of an integrated business not considered farming and requires inventories, the farming operations may be required to use inventories.[(IRC Regulation 1.466-1-(d)(1)].
