Source: http://www.law.cornell.edu/uscode/text/26/464?quicktabs_8=0
Timestamp: 2013-12-13 02:43:46
Document Index: 542286959

Matched Legal Cases: ['§ 464', '§ 464', '§ 464', '§ 207', '§ 701', '§ 5', '§ 404', '§ 803', '§ 1008', '§ 312', '§ 404', '§ 803', '§ 404']

26 USC § 464 - Limitations on deductions for certain farming | Title 26 - Internal Revenue Code | U.S. Code | LII / Legal Information Institute
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26 USC § 464 - Limitations on deductions for certain farming
In the case of any farming syndicate (as defined in subsection (c)), a deduction (otherwise allowable under this chapter) for amounts paid for feed, seed, fertilizer, or other similar farm supplies shall only be allowed for the taxable year in which such feed, seed, fertilizer, or other supplies are actually used or consumed, or, if later, for the taxable year for which allowable as a deduction (determined without regard to this section).
Certain poultry expenses
In the case of any farming syndicate (as defined in subsection (c))—
the cost of poultry (including egg-laying hens and baby chicks) purchased for use in a trade or business (or both for use in a trade or business and for sale) shall be capitalized and deducted ratably over the lesser of 12 months or their useful life in the trade or business, and
the cost of poultry purchased for sale shall be deducted for the taxable year in which the poultry is sold or otherwise disposed of.
Farming syndicate defined
For purposes of this section, the term “farming syndicate” means—
any interest held by a member of the family (or a spouse of any such member) or a grandparent of an individual described in subparagraph (A), (B), (C), or (D) if the interest in the partnership or the enterprise is attributable to the active participation of the individual described in subparagraph (A), (B), (C), or (D).
For purposes of subparagraph (A), where one farm is substituted for or added to another farm, both farms shall be treated as one farm. For purposes of subparagraph (E), the term “family” has the meaning given to such term by section 267
Subsection (a) shall not apply to any amount paid for supplies which are on hand at the close of the taxable year on account of fire, storm, or other casualty, or on account of disease or drought.
The term “farming” means the cultivation of land or the raising or harvesting of any agricultural or horticultural commodity including the raising, shearing, feeding, caring for, training, and management of animals. For purposes of the preceding sentence, trees (other than trees bearing fruit or nuts) shall not be treated as an agricultural or horticultural commodity.
The term “limited entrepreneur” means a person who—
Subsections (a) and (b) to apply to certain persons prepaying 50 percent or more of certain farming expenses
In the case of a taxpayer to whom this subsection applies, subsections (a) and (b) shall apply to the excess prepaid farm supplies of such taxpayer in the same manner as if such taxpayer were a farming syndicate.
Taxpayer to whom subsection applies
This subsection applies to any taxpayer for any taxable year if such taxpayer—
does not use an accrual method of accounting,
has excess prepaid farm supplies for the taxable year, and
is not a qualified farm-related taxpayer.
For purposes of this subsection, the term “qualified farm-related taxpayer” means any farm-related taxpayer if—
the aggregate prepaid farm supplies for the 3 taxable years preceding the taxable year are less than 50 percent of,
the aggregate deductible farming expenses (other than prepaid farm supplies) for such 3 taxable years, or
the taxpayer has excess prepaid farm supplies for the taxable year by reason of any change in business operation directly attributable to extraordinary circumstances.
Farm-related taxpayer
For purposes of this paragraph, the term “farm-related taxpayer” means any taxpayer—
whose principal residence (within the meaning of section 121) is on a farm,
who has a principal occupation of farming, or
who is a member of the family (within the meaning of subsection (c)(2)(E)) of a taxpayer described in clause (i) or (ii).
Excess prepaid farm supplies
The term “excess prepaid farm supplies” means the prepaid farm supplies for the taxable year to the extent the amount of such supplies exceeds 50 percent of the deductible farming expenses for the taxable year (other than prepaid farm supplies).
The term “prepaid farm supplies” means any amounts which are described in subsection (a) or (b) and would be allowable for a subsequent taxable year under the rules of subsections (a) and (b).
The term “deductible farming expenses” means any amount allowable as a deduction under this chapter (including any amount allowable as a deduction for depreciation or amortization) which is properly allocable to the trade or business of farming.
Except as provided in subsection (f),subsections (a) and (b) shall not apply to any taxable year beginning after December 31, 1986.
(Added Pub. L. 94–455, title II, § 207(a)(1),Oct. 4, 1976, 90 Stat. 1536; amended Pub. L. 95–600, title VII, § 701(l)(3),Nov. 6, 1978, 92 Stat. 2907; Pub. L. 97–354, § 5(a)(30),Oct. 19, 1982, 96 Stat. 1695; Pub. L. 99–514, title IV, § 404(a), (b)(1), title VIII, § 803(b)(8),Oct. 22, 1986, 100 Stat. 2223, 2224, 2356; Pub. L. 100–647, title I, § 1008(a)(4),Nov. 10, 1988, 102 Stat. 3437; Pub. L. 105–34, title III, § 312(d)(1),Aug. 5, 1997, 111 Stat. 839.)
1997—Subsec. (f)(3)(B)(i). Pub. L. 105–34substituted “section 121” for “section 1034”.
1986—Pub. L. 99–514, § 404(b)(1), substituted “for certain farming” for “in case of farming syndicates” in section catchline.
Subsec. (d). Pub. L. 99–514, § 803(b)(8), substituted “Exception” for “Exceptions” as heading and amended text generally. Prior to amendment, text read as follows: “Subsection (a) shall not apply to—
“(1) any amount paid for supplies which are on hand at the close of the taxable year on account of fire, storm, flood, or other casualty or on account of disease or drought, or
“(2) any amount required to be charged to capital account under section 278.”
Subsec. (f). Pub. L. 99–514, § 404(a), added subsec. (f).
1982—Subsec. (c)(1)(A), (B). Pub. L. 97–354substituted “an S corporation” for “an electing small business corporation (as defined in section 1371
1978—Subsec. (c)(2). Pub. L. 95–600substituted in subpar. (E) “(or a spouse of any such member)” for “(within the meaning of section 267
(c)(4))” and provided that for purposes of subpar. (E) the term “family” has the meaning given to such term by section 267
If any interest costs incurred after Dec. 31, 1986, are attributable to costs incurred before Jan. 1, 1987, the amendment by section 803(b)(8) ofPub. L. 99–514is applicable to such interest costs only to the extent such interest costs are attributable to costs which were required to be capitalized under section 263 of the Internal Revenue Code of 1954 and which would have been taken into account in applying section 189 of the Internal Revenue Code of 1954 (as in effect before its repeal by section 803 ofPub. L. 99–514) or, if applicable, section 266 of such Code, see section 7831(d)(2) ofPub. L. 101–239, set out as an Effective Date note under section 263A of this title.
Section 404(c) ofPub. L. 99–514provided that: “The amendments made by this section [amending this section] shall apply to amounts paid or incurred after March 1, 1986, in taxable years beginning after such date.”
Amendment by section 803(b)(8) ofPub. L. 99–514applicable to costs incurred after Dec. 31, 1986, in taxable years ending after such date, except as otherwise provided, see section 803(d) ofPub. L. 99–514, set out as an Effective Date note under section 263A of this title.
Amendment by Pub. L. 95–600effective as if included in this section or section 447 of this title at the time of their enactment, Oct. 4, 1976, see section 701(l)(4) ofPub. L. 95–600, set out as a note under section 447 of this title.
Section 207(a)(3) ofPub. L. 94–455provided that:
“(A) In general.—Except as provided in subparagraph (B), the amendments made by this subsection [enacting this section] shall apply to taxable years beginning after December 31, 1975.
“(B) Transitional rule.—In the case of a farming syndicate in existence on December 31, 1975, and for which there was no change of membership throughout its taxable year beginning in 1976, the amendments made by this subsection shall apply to taxable years beginning after December 31, 1976.”