Our Cash Crop Pays Us $6,534.00 An Acre

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THERE CAN BE TAX ADVANTAGES TO RAISING SOD

Thanks to a 1976 Tax Court case (John W. Meyers, 66 TC 235), the Internal Revenue Service has issued Revenue Ruling 77-12. This ruling reverses a position held for more than 20 years and holds that a deduction for resource depletion can be claimed upon the sale of sod or balled nursery stock. That is: Each time balled nursery stock or sod is sold from a piece of land, the landowner making the sale can deduct an allocated portion of his land cost from the income he receives on the sale.

In the Meyers case, the Tax Court has apparently allowed a taxpayer in the business of producing and selling sod to allocate 34% of the cost of his land to topsoil ... on the assumption that the residual value of that property—without topsoil—would be only 66% of Its value as sod producing land.

Furthermore, since it was determined in this case that 16 cuttings of sod would deplete-or "use up"-all the topsoil on the land in question, it is presumed that 1/16 of the total value allocated to topsoil can be depleted each time a cutting of sod is made.

How can you justify a similar deduction? Demonstrate to the IRS's satisfaction the percentage of your land's cost which should be allocated to topsoil and the number of sod or balled nursery stock harvests which can be made from that topsoil before it is exhausted. It will then be a simple matter for you to make the proper prorated deduction from your; Income tax each time you sell sod or balled nursery stock from your land.

(And thanks to MOTHERS favorite CPA — whose professional standards prevent us from publishing his name — for researching and reporting on the Meyers case for us. — The Editors)

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