The total deduction for conservation expenses in any tax year islimited to 25% of your gross income from farming for the year. Reservation Hotels LuganoGross income from farming.Gross income from farming is the income you derive in the businessof farming from the production of crops, fish, fruits, otheragricultural products, or livestock. Gains from sales of livestockheld for draft, breeding, or dairy are included. Gains from sales ofassets such as farm machinery, or from the disposition of land, arenot included. Carryover of deduction.If your deductible conservation expenses in any year are more than25% of your gross income from farming for that year, you can carry theunused deduction over to later years. However, the deduction in anylater year is limited to 25% of the gross income from farming for thatyear, as well. Example.In 1999, you have gross income of $16,000 from two farms. Duringthe year, you incurred $5,300 of deductible soil and waterconservation expenses for one of the farms. However, your deduction islimited to 25% of $16,000, or $4,000. The $1,300 ($5,300 -$4,000) is carried over to 2000 and added to deductible soil and waterconservation expenses made in that year. The total of the 1999carryover plus 2000 expenses is deductible in 2000, subject to thelimit of 25% of your gross income from farming in 2000. Any expensesover the limit in that year are carried to 2001 and later years. Net operating loss.The deduction for soil and water conservation expenses is includedwhen figuring a net operating loss (NOL) for the year. If the NOL iscarried to another year, the soil and water conservation deductionincluded in the NOL is not subject to the 25% limit in the year towhich it is carried. |
