6.26 Ark. Code R. 51-424(a)(1)
Losses incurred in the operation of farms as business enterprises are deductible from gross income. If farm products are held for favorable markets, no deductions for shrinkage in weight or physical value or by reason of deterioration in storage, shall be allowed except as such shrinkage may be reflected in an inventory, if used to determine profits. The total loss by frosts, storm, flood or fire of a prospective crop is not deductible loss in computing net income. A farmer engaged in raising or selling stock, cattle, sheep, horses, etc., is not entitled to claim as a loss the value of animals that perish from among these animals that were raised on the farm, except as such loss is reflected if an inventory is used. The cost of any feed, pasture, or care which has been deducted as an expense of operation shall not be included as part of the cost of the stock for the purpose of ascertaining the amount of deductible loss. If gross income is ascertained by inventories, no deduction can be made for livestock or products lost during the tax year, whether purchased for resale or produced on the farm, as such losses will be reflected in the inventory by reducing the amount of livestock or products on hand at the close of the tax year. If any individual owns and operates a farm, in addition to being engaged in another trade, business, or calling, and sustains a loss from such operation of the farm, then the amount of loss sustained may be deducted from gross income received from all sources, provided the farm is not operated for recreation or pleasure.
6.26 Ark. Code R. 51-424(a)(1)