OCR Text |
Show Farmers Can Deduct Farm Losses Losses incurred in the operation of farms as business enterprises are deductible from gross income. If farm products are held for favorable fa-vorable markets, no deduction on account of shrinkage in weight or physical value, or by reason of deterioration de-terioration in storage, is aUowed, except as such shrinkage may be reflected in an inventory if used in determining profits. Hie destructionby frost, storm, flood or fire of a prospective crop is not deductible loss in computing since it represents the loss of anticipated an-ticipated profits which have never been reported as income. Likewise, a farmer engaged in raising and selling livestock, such as cattle, sheep and hogs, is not entitled to claim as a loss the value of animals that were raised on the farm, except as such loss is reflected in an inventory, in-ventory, if used. If livestock has been purchased for any purpose, and afterward dies from disease, exposure or injury, or is killed by order of the authorities of a state or the United States, the actual purchase price of such livestock less any depreciation allowable as a deduction in respect o'f such perished per-ished livestock, may be deducted as a loss if the loss is not compensated com-pensated for by insurance or otherwise. other-wise. The actual cost of other property (with proper adjustment for depreciation) which is destroyed by order of state or federal authorities authori-ties may likewise be claimed as a loss. If reimbursement is made by a state or the United states in whole or in part on account of stock killed or other property destroyed de-stroyed in respect of which a loss was claimed in a prior year, the amount received is required to be reported as income for the year in which reimbursement is made. The cost of any feed, pasture, or care which has been deducted as an expense ex-pense of operation must not be included in-cluded as part of the cost of the stock for the purpose o'f ascertaining ascertain-ing the amount of a deductible loss. If gross income is ascertained by the use of inventories, no deduction can be taken separately for livestock live-stock or products lost during the year, whether purchased for resale or produced pn the farm, as such losses will be reflected in the inventory inven-tory by reducing the amount of livestock or products on hand at the close of the year, which has the effect of reducing gross income from business by the amount of the loss. If an individual owns and operates ope-rates a 'farm in addition 'to being engaged in another trade or business busi-ness or calling, and sustains the loss from the farming operations, such loss may be deducted from gross income received from all sources in determining the taxpayer's tax-payer's net income, provided such f arm is not operated for recreation or pleasure. If a 'farm is operated for recreation recrea-tion or pleasure and not on a commercial com-mercial basis, and if 'the expenses incurred in connection therewith are in excess of the receipts therefrom, the entire receipts from the sale of products may be ignored in rendering ren-dering a return of income, and the expenses incurred, being regarded |