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This client has a basis in the fence of $37,000 (if this was the amount he was reimbursed). It is depreciable as a land improvement, probably over 15 years. But he has to have an operation to accommodate the depreciation. In order to deduct he must operate the farm on Sch F, or rent on Form 4835, or otherwise have a for-profit operation involving the property. I have a few clients who spend a buncha $$ on their place and want to create deductions because they tell me they are "going to" have cattle or something soon. Some of these guys never begin an operation, and I believe they had no intention when the money was spent. They were just trying to get Uncle Sam to subsidize their expenditure. Unless I see the evidence, I tell them I will begin depreciating when they begin utilizing the land.

No Biz or Farm activity? No rental to others to graze their cattle? (Is he lying about that income?) Why build fences on property that has no animals on it? Then you get reimbursed by the DofA for building these fences Cool. The government does not reimburse me when I put up fences, so why does it reimburse him? The quick answer is he filed the application and made statements to the DofA that got him approved for the money. Get a copy of the grant application. Then your client lied to you about receiving the money. "He Forgot" that is why it is on the Transcript, and I presume you are dealing with a CP-2000 issue. I like Edsel's answer above. When he starts a farm, Biz or Rental, then he can depreciate his basis. Until then, he has to pay tax on the grant. He can't use it to reduce his basis in the property, because he isn't using the property for Farm, Biz or Rental, and it wasn't an easement, he didn't give anything up. He got something. Rich

Line 21. The Department of Agriculture (we) gave him $37,000 in "other income". Just like winning a prize at the county fair only more like winning 37,000 prizes. Also like having $37,000 in credit card debt cancelled.

Pacun, get on your state website where your client is. Might not be DC, but possibly MD or VA. There should be an IFTA reporting website online. You will need for each unit, miles driven in every state, and gallons purchased in every state. If there are many units, this could take some time. Miles per gallon will be calculated by the website for each unit (truck). Let the website do this, don't depend on the client to tell you how wonderful his mileage is. The website should divide the mileage by the MPG, to derive the gallons which should have been burned in each state. If you have purchased that many gallons or more in that state, you will be entitled to a credit. Credit is calculated by the fuel tax per gallon times the "excess" gallons. The reverse is true if the unit has not purchased enough gallons in a state where they have burned gallons. The IFTA charges you for those states. The net of all the charges and credits results in an excess charge that you have to pay, and if there is a net credit, you simply apply it to the next quarter. Some states (e.g. Indiana and Kentucky) have a surcharge that is not charged at the pump. The surcharge is built into the IFTA calculation such that if your truck travels through such a state, you are likely to have to pay extra. Drivers love to fill up in South Carolina, who has the lowest pump tax of any other state. They will drive across the line from Charlotte, NC and places in Georgia just to buy cheaper fuel. However, if they don't drive more than this in South Carolina, the calculation will result in a credit from SC and a whopping charge for GA or NC. It all works out.

I think it would be easier to deliberately terminate the S Election. Suggest you review the reasons that terminate an S Election.

I agree. His basis is $37,000 after he pays the tax on the grant money. Agricultural fences are normally depreciated over seven years in farm businesses. And he does not have a farm business until he has a farm business. If you find out he already does have a business, the $37,000 belongs on the appropriate schedule or form: Schedule E, Schedule F, Form 4835, etc.

Where are you going to deduct the depreciation ? What if the cow grazing never happens ?

I had a client in a very similar situation several years ago receive a state grant to reimburse him for brush control. He also received a 1099, which I reported as misc income.

Will check this out futher. Thanks all.

When in danger, or in doubt, run in circles, scream, and shout! (RA Heinlein) I have absolutely NO clue - but thought you might get a chuckle out of the quote.

Nerd humor; from a friend Ingredients: 532.35 cm3 gluten 4.9 cm3 NaHCO3 4.9 cm3 refined halite 236.6 cm3 partially hydrogenated tallow triglyceride 177.45 cm3 crystalline C12H22O11 177.45 cm3 unrefined C12H22O11 4.9 cm3 methyl ether of protocatechuic aldehyde Two calcium carbonate-encapsulated avian albumen-coated protein 473.2 cm3 theobroma cacao 236.6 cm3 de-encapsulated legume meats (sieve size #10) To a 2-L jacketed round reactor vessel (reactor #1) with an overall heat transfer coefficient of about 100 Btu/F-ft2-hr, add ingredients 1, 2 and 3 with constant agitation. In a second 2-L reactor vessel with a radial flow impeller operating at 100 rpm, add ingredients 4, 5, 6, and 7 until the mixture is homogenous. To reactor #2, add ingredient 8, followed by three equal volumes of the homogenous mixture in reactor #1. Additionally, add ingredient 9 and 10 slowly, with constant agitation. Care must be taken at this point in the reaction to control any temperature rise that may be the result of an exothermic reaction. Using a screw extrude attached to a #4 nodulizer, place the mixture piece-meal on a 316SS sheet (300 x 600 mm). Heat in a 460K oven for a period of time that is in agreement with Frank & Johnston's first order rate expression (see JACOS, 21, 55), or until golden brown. Once the reaction is complete, place the sheet on a 25C heat-transfer table, allowing the product to come to equilibrium. Enjoy!

A dog gave birth to puppies near the road and was cited for littering...

A father puts his young daughter to bed every night and loves listening to her say her prayers. One night she says "God bless Mommy, Daddy, Grandma, and goodbye grandpa." The next day grandpa dies. Father thinks, that's weird. The next night the little girl says "God bless Mommy, Daddy, and goodbye Grandma." Next day grandma dies. Father is shocked and thinks he has a psychic daughter. The third night she says "God bless Mommy and goodbye Daddy." Holy Cow! he thinks. The next day he is careful driving to work and stays in his office watching the clock until it hits midnight, he made it through the day. So he goes home and tells his wife he had a rough day trying to stay alive, she says, "you think you had a bad day, my tennis pro died today!"