Frequently asked questions

Soil Nutrient Deductions let agricultural landowners claim the value of existing fertilizer nutrients in their soil as a tax-deductible asset.

When you buy or inherit farmland, part of what you're paying for is the fertility already in the ground. This deduction recognizes that value.

You may qualify if you:

• Own or inherited farmland, ranchland, or timberland.
• Have enough tax basis in the property to support the deduction.
• Are either an active producer or a landowner leasing out the land.

It allows you to recover part of your land investment through the tax code while improving how you track and manage soil fertility.

Two key authorities:

• Private Letter Ruling 9211007 (1991): outlines how fertilizer purchased with land can be amortized.
• MSSP Training 3149-122 (1995): details documentation and ownership requirements for residual fertilizer deductions.

Yes. Under Section 180, active farmers and ranchers can deduct 100% in the filing year. Alternatively, you can amortize under Sections 167, 168, or 611, spreading it over 3–7 years. Any unused portion can be carried forward.

FDI provides a 4-year straight-line depreciation schedule as a general guideline. Your CPA may recommend a different schedule based on your operation and tax strategy.

• The deduction reduces your land's basis, which can increase taxable gain at sale.
• Recapture may be taxed as ordinary income or capital gain, depending on nutrient depletion.
• For inherited land, the basis is reset, eliminating prior recapture issues.

Yes. Any purchase price allocated to fertilizer value is treated as ordinary income for the seller, rather than capital gain.

Yes. If you reinvest sale proceeds in a new property, the deduction and any gain can be deferred through a 1031 exchange.

Yes. Partnerships or LLCs can amend their operating agreements to:

• Allow one member to fund and receive the deduction.
• Assign the full benefit to specific members.

Keep in mind that the entire deduction amount is subject to recapture when the land is sold.

• If land was partly owned through an LLC and later fully acquired, the deduction period starts when full ownership is gained.
• If land was owned individually and then transferred to an LLC, the original ownership date applies.
• The IRS generally treats individual and LLC ownership the same for this deduction.

After a short intro call, FDI visits your property in person for a consultation, typically within 48 hours. Soil samples are taken within two weeks, and you receive your Soil Forensics Report™ in three to four weeks total.

An audit-defensible Soil Forensics Report™ built on in-person sampling and licensed third-party lab analysis, prepared so your CPA can file the deduction with confidence.

Yes. FDI provides the third-party documentation your CPA needs and will coordinate directly with them on request. CPAs, ag lenders, and land brokers can also join FDI's $5/acre referral program.