Have you recently purchased farmland? If so, there’s an offering from Advanced Agrilytics that might help you take advantage of a tax deduction. Section 180 of the IRS tax code offers landowners an opportunity to deduct the value of the residual fertility of recently purchased land.
Advanced Agrilytics’ Residual Fertility Valuation Program helps landowners calculate the value of the opportunity with confidence and precision.
The Residual Fertility Valuation Program is designed to help growers assess and document the fertility status of newly acquired farmland. Through a comprehensive analysis and creation of a Residual Fertility Valuation Report, growers receive a geospatially informed summary of current soil macro- and micronutrient levels to support deduction. The report transforms your soil fertility data into a financial asset, documenting and validating the value of residual soil fertility.
In this article, we’ll explore what Section 180 entails, what’s included in the Residual Fertility Valuation Report, and what landowners should know to determine whether they might benefit.
“With an extensive history of soil analysis and fertility expertise coupled with groundbreaking technology, Advanced Agrilytics is uniquely qualified to create and offer this new tool for landowners,” explains Rick Reigner, Executive Vice President of Grower Direct with Advanced Agrilytics. “What we have created is a science-based, defensible process to value the residual fertility at the time of land acquisition. The report provides growers with the data set needed to pursue a residual fertility deduction with their tax advisor.”
The Residual Fertility Valuation Report is engineered by Advanced Agrilytics’ Data Science Team and created using TerraFraming™, our proprietary spatial agronomy intelligence platform. The technologies and processes utilized are the result of Advanced Agrilytics investing more than $25 million in research and development, including sixteen proprietary patents (and four more are pending). In addition, the Advanced Agrilytics team boasts more than 150 years of combined soil science experience, offering unmatched precision and credibility.
What Is Section 180?
Section 180 of the Internal Revenue Code allows qualified landowners engaged in farming to deduct the cost of fertilizer, lime, and other materials used to enrich or condition land used for farming. It may also allow landowners of newly acquired land to treat the residual fertility (pre-existing nutrients) as a deductible cost.
Who Is Eligible?
While the IRS publishes no exhaustive list, eligibility for a Section 180 deduction generally requires that:
- The landowner purchased the farmland recently, and
- They are actively engaged in farming with a profit motive.
Importantly, the IRS has not precisely defined what constitutes “newly acquired” land. However, the general guidance is that the closer the activity is to the time of land purchase, the stronger the case for deductibility. Many CPAs view land purchased within the last three to five years as a potential candidate, though the exact time window will depend on the facts and circumstances of each case. Landowners should consult with their tax advisors to determine eligibility.
What Are the Limitations of Section 180?
There are limitations to what can and cannot be claimed as a deduction under Section 180:
- Excess Fertility: Only the value of “excess” fertility (nutrient levels above normal) can be deducted.
- Previous Renters: If the current owner previously rented the land, they must differentiate between the fertilizer costs that were already deducted as a rental expense and the residual fertility value at the time of purchase. Recapture: If a deduction for excess fertilizer supply is claimed and the land is subsequently sold, the amount of the selling price attributable to the excess fertility may be recaptured as ordinary income.
Consult with a tax professional to navigate the deduction process.
Why Is a Residual Fertility Valuation Report Important?
To substantiate a Section 180 deduction, it’s critical to document the fertility status of the land at the time of acquisition. This is where Advanced Agrilytics’ Residual Fertility Valuation Report is a tremendous help to you and your CPA when filing for the deduction.
What’s Included in the Report?
Each Residual Fertility Valuation Report includes:
- Nutrient Inventory: Soil-based valuation of residual macro- and micronutrients
- Valuation Summary: Total dollar value of nutrients above average soil fertility for the farmland
- Geospatial Layers: Field maps of nutrient concentration and variability
- Compliance Support: Provides documentation to help meet IRS Section 180 guidance
How Do I Get Started?
Getting started with the Residual Fertility Valuation Program is straightforward:
- Complete the interest form: Start the process by filling out a brief form. Your rep can do this with you or on your behalf.
- Receive your proposal: We confirm eligibility and send a contract outlining pricing, acreage and terms.
- Upload field boundaries and soil data: If you already have soil test data and field maps, share them. If not, we will guide you through what’s needed.
- Data processing and QA: Our team uploads and verifies your field data in TerraFraming and then runs your report.
- Receive your final report: You get a PDF report with nutrient maps, values, and documentation to support your CPA’s Section 180 (or another residual fertility tax code) tax filing.
Note: No new sampling is required if soil data is current and complete. We will take care of formatting and audit readiness.
A Final Note: Consult Your Tax Advisor
While the Residual Fertility Valuation Report is designed to support eligibility for Section 180 and other residual fertility tax deductions, Advanced Agrilytics does not provide tax or legal advice. All tax-related decisions should be made in consultation with a qualified CPA or tax attorney familiar with your specific financial and operational circumstances.
Advanced Agrilytics does not provide legal, tax, or accounting advice. The information in this document is for general informational purposes only and should not be relied upon as a substitute for professional guidance. We are not certified public accountants (CPAs), attorneys, or tax advisors. Eligibility for IRS Section 180 deductions depends on individual circumstances and is subject to interpretation and approval by the Internal Revenue Service. We do not guarantee results or acceptance of any tax filing or deduction claim. Please consult your CPA or tax professional to determine how this information may apply to your specific situation.
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