DEPRECIATION

[TAXMAN]

Have cash basis TP farmer who sold some of his purchased stock cows that never got into depreciation. Now that I have to put them on 4797 do I calculate dep allowed but not taken? Since we are paying tax on that depr. can we legally add it back to basis for cost or can we pick up all depreciation in one year. These cows were bought in 2005 and cost 8600.00. What does this board think or some one who handles farm returns.

[Dale in IN]

Taxman:

Look at pub 225 FARMERS TAX GUIDE, Page 56. There is a chart there that tells you where to take them. Most live stock is not depreciated unless it is very expensive breeding Stock. Since there was no depreciation taken I would Show the Depreation as $0.00. I in 26 years of tax prep have only had 1 client that wanted to depreciate live stock. Then when he sold it he never told me that he had sold it!

Dale

[kcjenkins]

I depreciate breeding stock, because that is the proper way to treat them, but in a case where it had not been depreciated, you can simply report the sale on Line 1 of the F, and the cost on Line 2, and you are good to go. That is taking the position that the stock was bought to raise and sell.

Or if you think they really should have been depreciated, as they were used as breeding stock, you can take the depreciation on a 3115, if you really want a hard way to get the same result.