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For cash-method taxpayers, what are the IRS’s general rules for deductible prepaid expenses for livestock and farming operations?

April 26, 2017cash-method deductible expenses farming IRS livestock prepaid rules taxpayers

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For cash-method taxpayers, what are the IRS’s general rules for deductible prepaid expenses for livestock and farming operations?

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Expenditures must be for a purchase rather than a deposit, and the prepayment must be made for a business purpose and not tax avoidance. The deduction will not result in a material distortion. Internal Revenue Code (IRC) Section 464(f) limits deductible prepaid farm supplies to 50 percent of deductible farm expenses for the year.