When a farm is acquired, it is important from a tax standpoint to allocate value to depreciable items and set those items up on the appropriate depreciation schedule beginning with the tax year in which possession is obtained. Of course, land is not depreciable, but when a farm is acquired, there may be items on the land that are depreciable such as fences, drainage tile, buildings, corrals, timber, wells, water lines and residual fertilizer supply. There may be other items (such as a gravel road) that should also have cost allocated to them. How to properly allocate value to these items has become increasingly important in recent months given the increase in farmland values in many parts of the United States, particularly in the Cornbelt. That rise may indicate that greater amounts can be allocated to depreciable items than what has historically been the case. Unfortunately, many purchase contracts or documents associated with gifted or inherited assets do not identify any purchase price allocation for the various assets involved. But, IRS will generally respect whatever agreement the parties to the transaction can agree upon if the parties are not related.