Inventory is something that you sell. Prepaid supplies are used to assist your business. Raw materials are used to produce inventory. Inventory, prepaid supplies, and raw materials are all current assets. Inventory cattle are raised cattle, available for sale. Current assets are available for sale. Fixed assets are part of your business to generate income. From Schedule F (Form 1040), Profit or Loss from Farming, they refer to mama cows as livestock and other resale items. Implies that cow/calf operations buy cows to resale them. Granted, a lot of cows are culled and sold, but I would not classify them as resale cattle. Calves put on feed and sold the following year, are inventory cattle.
When you do sell mama cows, the IRS wants to know how much you paid for those cows. That amount is to be reported to the IRS on schedule F as “Cost or other basis of livestock or other items reported on line 1a”. The “other basis” is to include any feed given to replacement heifers or bulls.
Continue reading “Inventory Cattle”