Question

13. Ellie May is a farmer and during 2018, bought fertilizer ($10,000), feed ($5,500) and seed ($1,200) to be used on her farm the following year. Her other deductible farm expenses total $22,300. What amount of prepaid farm supplies may Ellie May deduct for the current year? $22,300 $16,700 $11,150 $8,350

Answer 1

Answer:- $11,150

Computation:-

Fertilizer $10,000

Feed $5,500

Seed $1,200

Total Prepaid farm Supplies $16,700

Under the current regulations, the IRS allows, in the year of payment, a deduction for prepaid farm supplies that does not exceed 50% of the other deductible farm expenses. The deduction for any excess prepaid farm supplies is allowed as a deduction in the tax year in which the supplies are actually used or consumed.

So, Maximum prepaid supplies Ellie may deduct for the current year = $22,300*50% = $11,150.

Please give a Thumbs up ? Thanks!!