Rev. Rul. 55-188

Where farmers use the accrual basis of accounting for farm income for Federal income tax purposes, and use separate Schedule D (Form 1040), to compute gain or loss on the sale of animals born and raised on the farm, and held for a period of more than 12 months for breeding purposes, they should enter in column 6, of such separate schedule, `Cost or other basis,' of an amount representing inventory value of the animals at the beginning of the taxable year plus any additional normal costs incurred with respect to such animals during the taxable year. However, in such cases, the inventory value of such animals at the beginning of the taxable year must be eliminated from the opening inventory for such year. The additional normal costs incurred with respect to such animals for the taxable year must be climinated from the farm expenses for such year.

¹ This Revenue Ruling has been amplified by Revenue Ruling 55-736, I.R.B. 55-51, p. 18