Initial cost
The initial cost of the herd is not deductible in arriving at the computation of taxable profits. Additions are not deductible and the value is not brought to account1.
Additions
When an animal is added by transfer from trading stock, there is included, as a trading receipt, the cost of acquisition and rearing, or breeding and rearing2. Where actual cost cannot be determined, the 'deemed' cost basis may be used, see B5.138. The object of this adjustment is to compensate for whatever past deductions have been allowed in respect of that particular animal. Animals acquired by gift are treated as acquired at market value.
Replacements
When a herd animal dies or ceases to form part of the herd, and is replaced by another animal, the proceeds of sale of the old animal are included as a trading receipt; and the cost of the animal which replaces it is deductible as a trading expense. However, if the cost of the replacement has already been deducted, because it
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