For farmers who raise certain crops with a longer pre-productive life (over two years) such as apples, oranges, and other similar plants, one of the tax rules under Section 263A require all of the costs associated with planting and growing this crop until it reaches economic production to be capitalized and then depreciated over ten years. The IRS has a list of these plants which they periodically update.
The IRS just released Revenue Notice 2013-18 removing blackberries, raspberries and papayas from these rules. This means cash basis farmers will now be able to deduct normal growing costs associated with these plants from the time of planting forward. Hard asset costs such as irrigation systems, wells, etc. will still be capitalized and depreciated over their normal life.
Revenue Procedure 2013-20 provides guidance on the timing and procedures to follow in making this change. This should be welcome news for those farmers since accounting and accumulating these costs can provide heartburn to farmers and their accountants.
Paul Neiffer, CPA