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We previously reported on the development of genetically modified citrus trees by IFAS that show enhanced resistance to citrus greening, as well as potentially canker and black spot. While many growers have not replanted groves lost to freeze, hurricanes, citrus canker, and citrus greening due to the ever-looming threat of citrus greening, this new development provides hope that replanting will be viable in the coming years.
When growers replant trees lost “by reason of freezing temperatures, disease, drought, pests, or casualty,” there are significant tax advantages and planning opportunities available under Code Section 263A(d)(2) to expense the costs of replanting. At present, these benefits are only available, however, when the taxpayer who suffered the initial loss retains a certain level of interest in the replanted property. The benefits of the new research will likely not be available for several years.
Guidance for how best to plan to take advantage of Code Section 263A in the future can be found by reference to Code Section 1033, which similarly offers a benefit where property is lost to various casualties or condemnation. Code Section 1033 provides that no gain is recognized where property is involuntarily converted “into property similar or related in service or use” to the converted property. This benefit, however, is limited to the taxpayer who owned the property at the time of the conversion.
In the context of Code Section 1033, Estate of Jayne, 61 T.C. 744, 750 (1974), is often cited for the proposition that an executor may “act in a representative capacity” and “stands in the shoes” of the decedent. In order for an executor to act in the stead of a decedent, however, the executor must be carrying forward the expressed wishes of a deceased taxpayer rather than acting on his or her own behalf. This rationale would likely apply equally to the advantages of Code Section 263A. Accordingly, we recommend that growers who have suffered such losses begin to develop a plan of replanting now to document their intent to replant and take advantage of the ability to expense the costs of replanting.
A plan of replanting should be documented and include background information, as well as the taxpayer’s goals for the replanting and a direction to the taxpayer’s executor to continue to pursue the plan in the event the taxpayer passes away prior to its completion. In addition, although the new trees are not available at this time, a taxpayer might consider beginning to take affirmative steps towards replanting such as setting aside separate funds to finance the replanting or preparing the land for new trees.
About the Author:
Dana M. Apfelbaum practices in the areas of federal income, estate, and gift tax law and family business succession planning. She counsels individuals in estate planning, with an emphasis on implementing the client’s objectives, asset protection and minimizing wealth transfer taxes. Ms. Apfelbaum also represents fiduciaries through all stages of probate, estate and trust administration. In addition, she represents businesses and business owners in all types of business and tax matters, including choice of entity, mergers and acquisitions, reorganizations, other general business matters, and succession planning. She may be reached at email@example.com.