Publication 225 |
2000 Tax Year |
Limit on Deduction
The total deduction for conservation expenses in any tax year is
limited to 25% of your gross income from farming for the year.
Gross income from farming.
Gross income from farming is the income you derive in the business
of farming from the production of crops, fish, fruits, other
agricultural products, or livestock. Gains from sales of livestock
held for draft, breeding, or dairy are included. Gains from sales of
assets such as farm machinery, or from the disposition of land, are
not included.
Carryover of deduction.
If your deductible conservation expenses in any year are more than
25% of your gross income from farming for that year, you can carry the
unused deduction over to later years. However, the deduction in any
later year is limited to 25% of the gross income from farming for that
year, as well.
Example.
In 2000, you have gross income of $16,000 from two farms. During
the year, you incurred $5,300 of deductible soil and water
conservation expenses for one of the farms. However, your deduction is
limited to 25% of $16,000, or $4,000. The $1,300 excess ($5,300
- $4,000) is carried over to 2001 and added to deductible soil
and water conservation expenses made in that year. The total of the
2000 carryover plus 2001 expenses is deductible in 2001, subject to
the limit of 25% of your gross income from farming in 2001. Any
expenses over the limit in that year are carried to 2002 and later
years.
Net operating loss.
The deduction for soil and water conservation expenses is included
when figuring a net operating loss (NOL) for the year. If the NOL is
carried to another year, the soil and water conservation deduction
included in the NOL is not subject to the 25% limit in the year to
which it is carried.
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