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Judge: not all farm expenses are tax deductible

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A probate court incorrectly allowed an estate to deduct three farm-related expenses from its inheritance tax return, but affirmed the deduction of the remaining nine in question, the Indiana Tax Court ruled Tuesday.

Curtis Daugherty inherited his uncle’s farm following the uncle’s death. He was also the personal representative of the uncle’s estate. The farm was in disrepair and he made many repairs and improvements to it. In filing the inheritance tax return, the estate claimed numerous deductions, including farming-related expenses. The probate court accepted the return as filed.

The Indiana Department of State Revenue asked the probate court for a rehearing on the filing because it believed some of the farm-related deductions were improper. The estate filed a counterclaim to deduct 10 more farm-related expenses and alleged that the regulation the department relied on to preclude the deductions was invalid. The probate court upheld its earlier ruling and also found the estate’s counterclaim was untimely.

In Indiana Dept. of Revenue v. Estate of Bernard A. Daugherty, No. 49T10-0909-TA-49, Tax Judge Thomas Fisher affirmed the denial of the estate’s motion to dismiss the department’s claim. The department alleged the farming-related deductions were improper pursuant to 45 IAC 4.1-3-11. The estate claimed that regulation is invalid. The probate court, in applying the same rules of construction that apply to statutes, held the regulation was presumed to be valid until the estate demonstrated otherwise. Since the estate argued the burden of proof was on the department to prove the statute wasn’t invalid, the estate didn’t show the statute was invalid.

Judge Fisher also affirmed that the probate court lacked subject matter jurisdiction over the estate’s counterclaim to add 10 more farming-related deductions. He rejected the estate’s argument that because its compulsory counterclaim was timely filed, Indiana Trial Rule 13 extended the 120-day statute of limitations for filing its own petition for rehearing. Because the estate sought affirmative relief with a counterclaim filed 128 days after the probate court’s initial determination, there was no error in finding the counterclaim was time-barred.

The probate court incorrectly allowed all 12 farming-related deductions. The deductions for clay drainage tiles, electrical repairs, grain bin repairs, and pole barn repairs were proper, as those expenditures were incurred during the course of administering the estate and were done to preserve, maintain, and repair the assets of the farm. The expenses related to the fertilizer bill, a pre-existing debt, were also deductible.

However, Curtis’ three expenditures for wheat spray weren’t deductible because he incurred those expenses while operating the farming business, wrote the judge. He remanded for the calculation of the proper amount of inheritance tax and interest due from the estate.
 

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  1. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

  2. During a visit where an informant with police wears audio and video, does the video necessary have to show hand to hand transaction of money and narcotics?

  3. I will agree with that as soon as law schools stop lying to prospective students about salaries and employment opportunities in the legal profession. There is no defense to the fraudulent numbers first year salaries they post to mislead people into going to law school.

  4. The sad thing is that no fish were thrown overboard The "greenhorn" who had never fished before those 5 days was interrogated for over 4 hours by 5 officers until his statement was illicited, "I don't want to go to prison....." The truth is that these fish were measured frozen off shore and thawed on shore. The FWC (state) officer did not know fish shrink, so the only reason that these fish could be bigger was a swap. There is no difference between a 19 1/2 fish or 19 3/4 fish, short fish is short fish, the ticket was written. In addition the FWC officer testified at trial, he does not measure fish in accordance with federal law. There was a document prepared by the FWC expert that said yes, fish shrink and if these had been measured correctly they averaged over 20 inches (offshore frozen). This was a smoke and mirror prosecution.

  5. I love this, Dave! Many congrats to you! We've come a long way from studying for the bar together! :)

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