PaulTry wrote:

- quote -

Mortality loss on the 2006 return. Yes, it's an expense.

- quote -

Off the top of my head, I'd say income if refund and
depreciable sheep with no basis if replaced. If it were my
client, though, I'd look it up before reaching a firm
conclusion.

Phoebe

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Friend has a small family farm, Schedule F filer, cash
basis. Among other things, he raises and sells meat breed
sheep. In 2006, he purchased several registered sheep which
were to be placed in service and depreciated as breeding
stock. (Since the sheep can be identified by their
individual registration numbers, he has historically
accounted for and reported each breeding stock sheep
separately on depreciation schedules, rather than as a
breeding stock herd.) Two of the sheep acquired in 2006
died shortly after receipt (apparent natural causes,
possibly from stress of shipping.) Since the two dead sheep
lived less than one year, they can't be depreciated.

How should he account for the dead sheep? Can the cost be
taken as a 2006 expense?

He is attempting to negotiate replacement or refund from the
seller. If the dead sheep can be expensed in 2006, how
would he account for replacement or refund, if any, in 2007?

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >