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planting service under Mr. Hooker’s supervision. The parties
agree that the costs incurred in establishing the citrus grove,
including purchase, bedding, installation of fertigation, and
irrigation of the trees are depreciable costs deductible over a
period of years.
After the 1989 trees were planted, the corporation incurred
certain developmental or cultivation expenses (including
herbicides, fertilizer, pesticides, interest, depreciation, and
care taking) that were not deducted for the years ended September
30, 1989 or 1990, but they were deducted in later years. The
corporation deferred the deduction of the developmental expenses
due to a lack of regulatory guidelines and because it was not
known whether the citrus grove would produce a marketable crop
within 2 years of planting the 1989 trees. At the end of a 2-
year productive period, the corporation reviewed the sales of
citrus in late 1990 and the potential for a 1991 crop based on
the spring blooms and decided to deduct, on its 1991 return, the
developmental expenses for the 1989 and 1990 taxable years. The
corporation did not deduct the cost of the trees but depreciated
them over a rateable period. For 1992 and subsequent taxable
years, the corporation deducted the developmental costs (i.e.,
herbicides, fertilizer, interest, depreciation, and care taking
expenses) for the 1989 trees for each year as incurred.
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