114 T.C. No. 28
UNITED STATES TAX COURT
PELAEZ AND SONS, INC., CHRISTINA P. HOOKER, TAX
MATTERS PERSON, Petitioner v. COMMISSIONER OF
INTERNAL REVENUE, Respondent
Docket No. 18049-97. Filed May 30, 2000.
Sec. 263A, I.R.C., enacted in 1986, requires the
capitalization of developmental costs. For plants with
preproduction periods that are 2 years or less, farmers
may be excepted from the capitalization requirements.
For certain plants, including citrus plants grown in
commercial quantities in the United States, the statute
requires that the standard for the 2-year test is to be
based on a national weighted average preproductive
period for that type of plant. If the preproductive
period, so determined, is 2 years or less, citrus
farmers could be excepted from the capitalization
requirement of sec. 263A, I.R.C. No guidance had been
issued as to the national weighted average
preproductive period for citrus trees as of 1989, when
P began growing citrus trees. Due to the lack of
guidance, P did not deduct its developmental costs for
the first 2 years and then determined, based on its
growing experience, that some of its citrus trees were
productive within 2 years. Based on that experience,
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