Depreciate a Farm Pond?

[RitaB]

I was about to tell the client, no, a pond just increases your basis. But reading Publication 225, I think it's possible, but limited to 25% of gross farm income each year. Is that correct? I gotta tell ya, I'm about fried. What would you use for the class life? Please forgive me if it's supposed to be obvious and I completely missed it.

[TaxmannEA]

If the pond was built under an approved conservation plan from the Farm Service Agency (Soil & Water Conservation Service), it is eligible to be written off as a conservation expense subject to the limits you mentioned. If not, then the cost is capitalized into the land basis. Pub 225 is a good source of information. You could also talk to the local FSA office for more guidance.

I have seen ponds built primarily as water resevoirs depreciated as a land improvement, but I would question that practice.

[RitaB]

If the pond was built under an approved conservation plan from the Farm Service Agency (Soil & Water Conservation Service), it is eligible to be written off as a conservation expense subject to the limits you mentioned. If not, then the cost is capitalized into the land basis. Pub 225 is a good source of information. You could also talk to the local FSA office for more guidance.

I have seen ponds built primarily as water resevoirs depreciated as a land improvement, but I would question that practice.

Thank you so much. I see it now in first column of p. 28. Client cannot depreciate his pond.

Unless he goes to Lefty across the tracks.

[RoyDaleOne]

Is true a true pond or one created by an earthen dam?

[RitaB]

Is true a true pond or one created by an earthen dam?

Huh?

A dozer dug out a hole and built a dam with the dirt. It's not a natural wet land or anything like that.

6400 smackers. My opinion, it's more a fishin' hole than a farm expenditure, if you catch my drift. One of those farmers who loses money every year. "Oh yeah, I'm tryin to make a profit..."

[RoyDaleOne]

Earthen dams are depreciable.

[RitaB]

Earthen dams are depreciable.

Thanks for the reply.

I guess the question becomes whether or not the dam has a determinable useful life:

Pub 225, p. 37:

"Dams, ponds, and terraces. In general, you cannot depreciate earthen dams, ponds, and terraces unless the structures have a determinable useful life."

Of course, when I tell my client that, he is going to say, "Oh, yeah, that dam ain't gonna last forever." When I ask him how long it will last, he'll look at my ceiling tiles, then ask me, "How long does it need to last?"

So, RoyDaleOne, do you know what the useful life is? I sure don't. And I really don't want to leave it up to this "farmer."

He's one of those people that wants to do what he can get away with, not what's correct.

When my farmer dad died, we spent 12,000 rebuilding a pond that was probably 35 years old. Some of the ponds are 35 years old, and the dams are just fine.

Also, if we can determine a useful life, it appears from Pub 225 that he did not have to have plan certification from Dept of Agriculture. Correct?

I appreciate your input. I will start looking for "class life of an earthen dam."

[RoyDaleOne]

A determinable life is a thing of the past, for the most part, see R. O'Shaughnessy CA-, 2003-1 USTC

Asset Class 00.3 (Land Improvements) 15 year Asset Class is the one to use.

See also R. L. Hunter, 46 TC 477 Dec 28,025 a dam was treated as a depreciable asset with a determinable life.

Dams are also included in other Asset Classes, 49.11 is an example.

The Pub is incorrect for the most part about dams.

[RitaB]

A determinable life is a thing of the past, for the most part, see R. O'Shaughnessy CA-, 2003-1 USTC

Asset Class 00.3 (Land Improvements) 15 year Asset Class is the one to use.

See also R. L. Hunter, 46 TC 477 Dec 28,025 a dam was treated as a depreciable asset with a determinable life.

Dams are also included in other Asset Classes, 49.11 is an example.

The Pub is incorrect for the most part about dams.

Thanks for your help! I surely do appreciate it...