Thursday, February 28, 2008

Tax Deduction Question

A question that many growers have asked is: Is it possible to take a tax deduction on my losses after last year's freeze damage to plants?
This is the answer that we must share:

Most generally no. The nursery, if they grow the plants from cutting or seed deduct the costs over the period these plants are being brought to "marketable size". So the nursery has gotten the tax benefit.

The freeze is treated as a casualty loss (unusual, sudden, unexpected event). Tax rules limit casualty losses to the LESSER OF, basis (costs of product) or the decrease in fair market value. Since, based on the first paragraph, the producer has zero basis (he/she has deducted all expenses) there is no casualty loss and no tax deduction for plant losses due to a freeze.

Has there been an economic loss, yes, no doubt. But there is not a tax loss we can use.

For more information contact your local Cooperative Extension Center and ask for the Commercial Horticulture Agent.