Instructions For Schedule F - Profit Or Loss From Farming

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amount of debt canceled in 2009. However,

tax year for which you can make this elec-

Personal or living expenses (such as

you may be able to exclude the canceled

tion and by applying the special rules, dis-

taxes, insurance, or repairs on your home)

debt from income. See Pub. 4681 for de-

cussed later on this page.

that do not produce farm income.

tails.

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Expenses of raising anything you or

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State gasoline or fuel tax refunds you

your family used.

In the case of a partnership or S

received in 2009.

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The value of animals you raised that

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corporation, the election must

The amount of credit for alcohol and

died.

be made by the partner, share-

cellulosic biofuel fuels claimed on Form

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Inventory losses.

holder, or member. This elec-

6478.

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tion cannot be made by tax shelters,

Personal losses.

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The amount of credit for biodiesel and

farming syndicates, partnerships, or corpo-

renewable diesel fuels claimed on Form

If you were repaid for any part of an

rations required to use the accrual method

8864.

expense, you must subtract the amount you

of accounting under section 447 or

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were repaid from the deduction.

The amount of credit for federal tax

448(a)(3).

paid on fuels claimed on your 2008 Form

If you pro-

Capitalizing costs of property.

1040. For information on including the

duced real or tangible personal property or

Unless you obtain IRS consent, you

credit in income, see chapter 2 of Pub. 510.

acquired property for resale, certain ex-

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must make this election for the first tax year

Any recapture of excess depreciation

penses must be included in inventory costs

in which you engage in a farming business

on any listed property, including any sec-

or capitalized. These expenses include the

involving the production of property sub-

tion 179 expense deduction, if the business

direct costs of the property and the share of

ject to the capitalization rules. You cannot

use percentage of that property decreased

any indirect costs allocable to that property.

revoke this election without IRS consent.

to 50% or less in 2009. Use Part IV of Form

However, these rules generally do not ap-

4797 to figure the recapture. See the in-

Special rules. If you make the election

ply to expenses of:

structions for Schedule C, line 13, on page

to deduct preproductive expenses for

1. Producing any plant that has a

C-5 for the definition of listed property.

plants:

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preproductive period of 2 years or less,

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The inclusion amount on leased listed

Any gain you realize when disposing

2. Raising animals, or

property (other than vehicles) when the

of the plants is ordinary income up to the

business use percentage drops to 50% or

3. Replanting certain crops if they were

amount of the preproductive expenses you

less. See chapter 5 of Pub. 946 to figure the

lost or damaged by reason of freezing tem-

deducted, and

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amount.

peratures, disease, drought, pests, or casu-

The alternative depreciation rules ap-

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alty.

Any recapture of the deduction for

ply to property placed in service in any tax

clean-fuel vehicles and clean-fuel vehicle

year your election is in effect.

refueling property used in your farming

For details, see Uniform Capitalization

business. For details on how to figure re-

Exceptions (1) and (2) do not

Rules in chapter 6 of Pub. 225.

capture, see Regulations section 1.179A-1.

apply to tax shelters, farming

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Any income from breeding fees, or

syndicates, partnerships, or cor-

Generally, if you

Prepaid farm supplies.

fees from renting teams, machinery, or

porations required to use the ac-

use the cash method of accounting and your

land.

crual method of accounting under section

prepaid farm supplies are more than 50% of

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447 or 448(a)(3).

The gain or loss on the sale of com-

your other deductible farm expenses, your

modity futures contracts if the contracts

deduction for those supplies may be lim-

were made to protect you from price

ited. Prepaid farm supplies include ex-

If you capitalize your expenses, do not

changes. These are a form of business in-

penses for feed, seed, fertilizer, and similar

reduce your deductions on lines 12 through

surance and are considered hedges. If you

farm supplies not used or consumed during

34e by the capitalized expenses. Instead,

had a loss in a closed futures contract, en-

the year. They also include the cost of poul-

enter the total amount capitalized in paren-

close the amount of the loss in parentheses.

try that would be allowable as a deduction

theses on line 34f (to indicate a negative

in a later tax year if you were to (a) capital-

amount) and enter “263A” in the space to

ize the cost of poultry bought for use in

the left of the total. See Preproductive pe-

For property acquired and

your farming business and deduct it ratably

riod expenses on page F-7 for details.

hedging positions established,

over the lesser of 12 months or the useful

you must clearly identify on

But you may be able to currently deduct

life of the poultry, and (b) deduct the cost

your books and records both the

rather than capitalize the expenses of pro-

of poultry bought for resale in the year you

hedging transaction and the item(s) or ag-

ducing a plant with a preproductive period

sell or otherwise dispose of it.

gregate risk that is being hedged.

of more than 2 years. See Election to de-

duct certain preproductive period expenses

If the limit applies, you can deduct pre-

Purchase or sales contracts are not true

paid farm supplies that do not exceed 50%

next.

hedges if they offset losses that already oc-

of your other deductible farm expenses in

Election to deduct certain preproductive

curred. If you bought or sold commodity

the year of payment. You can deduct the

period expenses.

If the preproductive pe-

futures with the hope of making a profit due

excess only in the year you use or consume

riod of any plant you produce is more than

to favorable price changes, report the profit

the supplies (other than poultry, which is

2 years, you can elect to currently deduct

or loss on Form 6781 instead of this line.

deductible as explained above). For details

the expenses rather than capitalize them.

and exceptions to these rules, see chapter 4

But you cannot make this election for the

of Pub. 225.

costs of planting or growing citrus or al-

mond groves that are incurred before the

Whether or not this 50% limit applies,

end of the fourth tax year beginning with

your expenses for livestock feed paid dur-

Part II. Farm

the tax year you planted them in their per-

ing the year but consumed in the later year,

manent grove. You are treated as having

may be subject to the rules explained later

Expenses

made the election by deducting the

in the line 18 instructions.

Do not deduct the following.

preproductive period expenses in the first

F-4

Instructions For Schedule F - Profit Or Loss From Farming - 2009 Page 4

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