5
See also Estate of Wilbur v. Commissioner, 43 T.C. 322, 327
(1964); Vinson v. Commissioner, T.C. Memo. 1979-175, affd. per
curiam 621 F.2d 173 (5th Cir. 1980). This regulation gives
farmers the option of deducting or capitalizing expenditures
incurred in the preproductive period which bear characteristics
of both capital outlays and ordinary expenses, and, as such, fall
within a "band of gray". Estate of Wilbur v. Commissioner, supra
at 328. Preproductive (or cultural) expenditures include
"irrigation, cultivation, pruning, fertilizing, spraying, and
other care expenses". Maple v. Commissioner, supra.
In the present case, petitioners incurred most of their
preparatory expenses during 1985, when they purchased and cleared
the land, bought the seedlings, and planted the nursery. Of the
expenses claimed on their 1986 return, all but $42 spent for
young plants or seeds constitute preproductive expenses since
they were incurred in the maintenance of the ligustrum trees. As
such, petitioners had the option to either capitalize or deduct
these expenses under section 1.162-12(a), Income Tax Regs.
However, for taxable years commencing after December 31,
1986, the Uniform Capitalization Rules (UCR) of section 263A
generally apply to property produced by a taxpayer or acquired
for resale that has a preproductive period of more than 2 years.
Under this section, direct and indirect costs allocable to such
property are required to be capitalized. The ligustrum seedlings
purchased by petitioners qualify as property acquired for resale
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