Hello,
My wife's cash crop farming business (not her primary income source) has made a loss for the last two years. As such, we have been asked to complete the mandatory inventory adjustment each year. We have no qualms with this at all.
It is unclear to me how to navigate this form on Turbo Tax as a cash crop farmer for two reasons:
1)
She does not have any "purchased inventory" per se. Her seed/fertilizer/other inputs were all used during the season to grow this year's crop.
She has the majority of this year's crop remaining to sell (in storage) but I would not interpret this as "purchased inventory" - perhaps sometime thinks otherwise?
2)
If the crop in storage is supposed to be interpreted as purchased inventory, it's unclear which boxes we need to fill in on this form and what value to use for the purchase price (perhaps fair value or direct inputs/costs only?).
The form is set up in Turbo Tax in a way which references animals, has 3 columns and references many years, has an additional box below, and it's not clear to me how this all worked together to generate the value for the MIA. There is not much guidance on the form at all, however it has a very material impact on our taxes if you use different values in different boxes so we really want to get this right.
Thank you in advance for your assistance
One of the necessary conditions for applying the mandatory inventory adjustment (MIA) is that there be purchased farming inventory on hand at the end of the year.
Based on your situation as described there is no purchased inventory, only the unsold harvested crop. Consequently the MIA does not apply to your situation.
In the TurboTax interview steps relating to farming income, before arriving at the inventory adjustment input form you refer to, in TurboTax Online Self-Employed edition, there is a panel with the heading “Let’s look at your farming income and expenses” and in TurboTax CD/download edition, there is a similar panel headed “T2042 Farming Profile.” Further on down in either panel, there is a checkbox for “Mandatory or optional inventory adjustment.” If that box is unchecked, TurboTax will not ask for any MIA information. The MIA box should not be checked if there is no purchased inventory.