Livestock held for breeding purposes can either be included in inventory or depreciated as the breeder chooses. Both options have advantages and disadvantages, so the decision is ultimately based on whether breeders prefer a current benefit or future benefit.
If breeders choose to depreciate the livestock, they will receive a current depreciation deduction. However, this will decrease the farmer’s basis in the livestock and therefore increase any gain when the livestock is sold.
Also, any future gain on a sale up to the amount of depreciation taken will be taxed at ordinary rates. If, on the other hand, breeders choose to inventory the livestock, they will forego the current depreciation deduction but any future capital gain will be taxed at the lower and more preferable capital gain rates.
Breeders should consider this decision and its impacts carefully, because once a method is chosen, it cannot be changed unless authorized by the Commissioner.
If the cost of each individual asset is $2,500 or less, you can expense them under the De Minimis Safe Harbor Election.
If you expense them, you would not include them in inventory. When you sell them you would treat it as the sale of an asset.
You may depreciate or section 179 "livestock", which includes snakes. Snakes not falling into any of the specific agricultural categories, you should use the actual expected lifespan of the animal for the depreciation period.
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