Rev. Rul. 59-42

Advice has been requested whether expenditures for brush control on productive land are considered expenditures for soil or water conservation deductible under section 175 of the Internal Revenue Code of 1954, or whether such expenditures represent ordinary and necessary expenses of a trade or business deductible under section 162 of the Code.

The taxpayer owns and operates a cattle ranch on land which had been cleared and used continuously for the grazing of cattle. In order to maintain the proper growth of grass for grazing, encroaching brush and other undesirable plants were periodically cleared from the land.

Section 162 of the Code provides, in part, that there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.

Section 175 of the Code provides, in part, that, subject to certain conditions and limitations, a taxpayer engaged in the business of farming may deduct expenditures which are paid or incurred during the taxable year for the purpose of soil or water conservation. Section 175(b) of the Code provides, in part, that the amount deductible under section 175 of the Code shall not exceed 25 percent of the gross income derived from farming during the taxable year. However, section 175(c)(1)(B) of the Code specifically provides that an expenditure which is allowable as a deduction under another section of the Code may not be considered under this section of the Code.

In the case of land which had reached the productive state, the cost of clearing brush from such land in order to maintain production constitutes an allowable deduction as a business expense. However, where the land had never been productive, the cost of clearing brush from such land constitutes a capital expenditure. See Mim. 6030, C.B. 1946-2, 45, as amended by Mim. 6030, Supplement 1, C.B. 1948-1, 42; Gifford A. Cochran v. Commissioner, T.C. Memo. 1955-66; Thompson & Folger Co. v. Commissioner, 17 T.C. 722; H. L. McBride v. Commissioner, 23 T.C. 901, acquiescence C.B. 1955-2, 7.

In the instant case, since the land had been cleared and used continuously for grazing cattle, the cost of periodically clearing encroaching brush and other undesirable plants from such land for the purpose of restoring and maintaining the proper growth of grass for grazing constitutes an ordinary and necessary business expense within the meaning of section 162 of the Code.

Accordingly, it is held that expenditures for clearing brush from productive land are not considered expenditures for soil or water conservation deductible under section 175 of the Code, but are deductible as ordinary and necessary business expenses under section 162 of the Code.