Harvesting Soil Nutrient Deductions

Soil is the major source of the nutrients essential for plants. Nutrients are chemical compounds that provide nourishment for the growth and maintenance of all life forms. In particular, nutrients needed for plant growth are derived from soil. Of the 17 essential nutrients for the growth of most plants, the most well-known soil nutrients are nitrogen (N), phosphorus (P) and potassium (K). They make up the trio known as “NPK.” When one of these essential plant nutrients is deficient, then plant growth will be reduced, even if all other essential nutrients are adequately supplied. Thus, maximum yield potential can only be achieved when the proper balance of nutrients is in place.

The objective of this article is to briefly review at a high level the planning opportunities afforded by various provisions of the Internal Revenue Code (“IRC” or “Code”) that authorize federal tax “legacy nutrient deductions” (“LNDs”) for properly valued and documented soil nutrients. This article is also intended to provide real estate and tax professionals with tools to successfully obtain LNDs in a fashion that should withstand any challenge by the Internal Revenue Service (“IRS”). All Section references herein refer to sections of the Code.