A Deduction of Zero is Still Zero

Published on: 07:49AM Sep 05, 2014

We had a reader ask the following questions:

"We expense all costs to raise the cattle: vet, supplies, etc. We grow our own feed and expense those costs: seed, fertilizer, etc. We have our farm set up as a LLC. Can we deduct a loss for calf deaths?"

Ranchers who raise their own stock, such as in this situation, are entitled to deduct all of the costs related to growing the calf until it is marketed. However, if they purchase a calf (such as a cow/calf pair), they normally would keep track of the calf cost until it is sold.

Therefore, there are two possible answers to this question. If the calf was born on the ranch and raised there, the tax deduction due to a death loss is zero. Since the ranch is allowed to deduct all of the feed and other costs associated with raising the calf, the rancher has a tax basis in the calf of exactly zero. Therefore, the rancher can deduct zero which is still zero.

However, if the rancher had purchased a calf for $700 and it died later on, the rancher would be entitled to deduct $700. Most cow-calf operations, the deduction is zero. Most stocker operations, the deduction would be $700 (or whatever the purchase price of the calf).