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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. I just wanted to point out that Congressman Jim Sensenbrenner, Senator Feinstein, former Senate majority leader Bill Frist, and former attorney general John Ashcroft are responsible for this rubbish. We need to keep a eye on these corrupt, arrogant, and incompetent fools.

  2. Well I guess our politicians have decided to give these idiot federal prosecutors unlimited power. Now if I guy bounces a fifty-dollar check, the U.S. attorney can intentionally wait for twenty-five years or so and have the check swabbed for DNA and file charges. These power hungry federal prosecutors now have unlimited power to mess with people. we can thank Wisconsin's Jim Sensenbrenner and Diane Feinstein, John Achcroft and Bill Frist for this one. Way to go, idiots.

  3. I wonder if the USSR had electronic voting machines that changed the ballot after it was cast? Oh well, at least we have a free media serving as vicious watchdog and exposing all of the rot in the system! (Insert rimshot)

  4. Jose, you are assuming those in power do not wish to be totalitarian. My experience has convinced me otherwise. Constitutionalists are nearly as rare as hens teeth among the powerbrokers "managing" us for The Glorious State. Oh, and your point is dead on, el correcta mundo. Keep the Founders’ (1791 & 1851) vision alive, my friend, even if most all others, and especially the ruling junta, chase only power and money (i.e. mammon)

  5. Hypocrisy in high places, absolute immunity handed out like Halloween treats (it is the stuff of which tyranny is made) and the belief that government agents are above the constitutions and cannot be held responsible for mere citizen is killing, perhaps has killed, The Republic. And yet those same power drunk statists just reel on down the hallway toward bureaucratic fascism.

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