The 10-Point CPA Review Checklist
Educational content only. The information on this page is provided for general informational purposes and does not constitute tax, legal, or accounting advice. Tax treatment depends on your specific facts and circumstances. Consult a qualified CPA or tax attorney before taking any tax position.
Confirm Taxpayer Profile and Applicable Code Section
Before reviewing any numbers, establish the correct tax pathway:
Active Operator → Section 180
Full deduction in year placed in service. Schedule F. Files as an ordinary farm expense.
Passive Landowner → §§ 167/168
Amortized over useful life. Form 4562. Treated as a depreciable asset.
Verify That Soil Samples Match the Purchased Acres
A credible report must tie soil test data to the specific parcel purchased. Confirm:
- Legal description or parcel ID for each tract
- Sampling dates aligned with acquisition date
- Segregation of distinct tracts — not averaged across unrelated acres
Unclear allocation creates audit risk and weakens defensibility.
Validate Lab Independence and Sampling Depth
Required:
- Independent, widely-recognized lab (land-grant university lab or reputable private lab)
- Sampling depth stated — must be 6–8 inches
- Extraction method specified (Bray, Mehlich-3, or Olsen)
Red Flags:
- Sampling depth not reported
- Proprietary or unconventional test methods
- No lab name or independent verification
Confirm Only Qualifying Nutrients Are Included
Should be included:
- ✓ Phosphorus (P → P₂O₅)
- ✓ Potassium (K → K₂O)
- ✓ Calcium (as CCE lime equiv.)
- ✓ Magnesium (as CCE lime equiv.)
Must not be included:
- ✗ Nitrogen (mobile, short-lived)
- ✗ Native background minerals
- ✗ Non-relevant nutrients (Fe, Mn, Cu, etc.)
- ✗ Nutrients not from managed inputs
Nitrogen cannot meet the IRS multi-year depreciable asset standard. Its inclusion is a significant red flag.
Check Conversion Logic and Fertilizer-Equivalent Math
Verify the conversion chain is transparent and reproducible:
ppm → lbs/acre (using 6-8" depth factor)
→ fertilizer equivalent (P → P₂O₅, K → K₂O)
→ $/lb at purchase-date market price
→ total fertility value ($)
You do not need to recompute the math — but there must be no "black box" numbers. Every step must be traceable.
Review Useful Life and Exhaustion Assumptions
The IRS requires depreciation to reflect actual useful life. A credible report ties its amortization period to crop-removal research from land-grant universities — typically 3–7 years for P and K under Corn Belt row-crop systems.
Flag for review:
Short amortization periods without explicit agronomic justification.
Verify Nitrogen Is Explicitly Excluded
The report should either state explicitly that nitrogen is not included, or explain why a limited carryover amount was included with full basis exclusion from the depreciable value. If nitrogen appears in the total without explanation, request clarification before filing.
Verify Basis Adjustment and Tax Treatment
The provider must clearly explain:
- The proposed fertility value
- That the land's cost basis must be reduced by that amount
- How Section 1245 recapture applies on future sale
- Whether a Form 3115 or Section 481(a) adjustment is contemplated for prior-year catch-up
Trace the Full Documentation Chain
An audit-ready report provides a complete, traceable chain of evidence:
Confirm Audit-Ready Formatting
The final deliverable should contain:
- Executive summary with key values and conclusions
- Methodology section describing sampling, calculations, and valuation logic
- Soil test reports in appendix
- Fertilizer pricing sources in appendix
- Conversion tables (ppm → lbs/ac → fertilizer equivalent)
A well-prepared report should answer most questions before you need to ask them — making the CPA's review straightforward.
The Complete CPA Technical Library
AgronomyPlus offers Form 3115 walkthroughs, 1031 exchange scenarios, inherited land analysis, basis recapture planning, and downloadable CPA checklists.