Frequently Asked Questions
Who is eligible for the Casualty Loss Replanting Exception?
Applies to taxpayers replanting plants bearing the same type of crop lost to natural disasters or pests.
How does the Casualty Loss Replanting Exception work?
Allows immediate deduction of costs to replant edible crops lost to freezing, disease, drought, or casualty, even if the taxpayer is otherwise subject to UNICAP.
What law authorizes the Casualty Loss Replanting Exception?
The Casualty Loss Replanting Exception is authorized under IRC §263A(d)(2) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §263A
Source: Internal Revenue Code, Title 26, United States Code
§ 263A. Capitalization and inclusion in inventory costs of certain expenses(a) Nondeductibility of certain direct and indirect costs(1) In generalIn the case of any property to which this section applies, any costs described in paragraph (2)—(A) in the case of property which is inventory in the hands of the taxpayer, shall be included in inventory costs, and
(B) in the case of any other property, shall be capitalized.
(2) Allocable costsThe costs described in this paragraph with respect to any property are—(A) the direct costs of such property, and
(B) such property’s proper share of those indirect costs (including taxes) part or all of which are allocable to such property.
Any cost which (but for this subsection) could not be taken into account in computing taxable income for any taxable year shall not be treated as a cost described in this paragraph.
(b) Property to which section appliesExcept as otherwise provided in this section, this section shall apply to—(1) Property produced by taxpayerReal or tangible personal property produced by the taxpayer.
(2) Property acquired for resaleReal or personal property described in section 1221(a)(1) which is acquired by the taxpayer for resale.
For purposes of paragraph (1), the term “tangible personal property” shall include a film, sound recording, video tape, book, or similar property.
(c) General exceptions(1) Personal use propertyThis section shall not apply to any property produced by the taxpayer for use by the taxpayer other than in a trade or business or an activity conducted for profit.
(2) Research and experimental expendituresThis section shall not apply to any amount allowable as a deduction under section 174 or 174A.
(3) Certain development and other costs of oil and gas wells or other mineral propertyThis section shall not apply to any cost allowable as a deduction under section 167(h), 179B, 263(c), 263(i), 291(b)(2), 616, or 617.
(4) Coordination with long-term contract rulesThis section shall not apply to any property produced by the taxpayer pursuant to a long-term contract.
(5) Timber and certain ornamental treesThis section shall not apply to—(A) trees raised, harvested, or grown by the taxpayer other than trees described in clause (ii) of subsection (e)(4)(B) (after application of the last sentence thereof), and
(B) any real property underlying such trees.
(6) Coordination with section 59(e)Paragraphs (2) and (3) shall apply to any amount allowable as a deduction under section 59(e) for qualified expenditures described in subparagraphs (B), (C), (D), and (E) of paragraph (2) thereof.
(7) Coordination with section 168(k)(5)This section shall not apply to any amount allowed as a deduction by reason of section 168(k)(5) (relating to special rules for certain plants bearing fruits and nuts).
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