Cash Basis Farmer Can Expense Packaging Materials as Purchased Rather Than When Used, But Decision Based on Regulation Changed Substantially Beginning in 2014

This post has been revised to incorporate comments the author received regarding the potential application of Reg. §1.162-12 to resolve the issue independently of how the Court actually decided the case.

In Agro-Jal Farming Enterprises, Inc. et al v. Commissioner, 145 TC No. 5 the Tax Court was asked to determine if a farmer reporting on the cash basis of accounting could claim a deduction for packaging materials as payment was made for the materials or if the taxpayer rather could only deduct the amounts as the materials were used.

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