[jmalicki]

If he donates these to a charity, what are the rules on taking a tax deduction for this unusual situation?

Can it have value for the purposes of a donation if you can't sell it? Would taking a tax deduction trigger a patent liability?

[s1artibartfast]

The entire crop cost is already tax dedeuctable by default. Taxes are on profits

[jmalicki]

Then that leads to the question... is it proper for the farmer to take the deduction for the costs of growing crops he is not legally allowed to sell?

[s1artibartfast]

Sure. Poor business decisions are entirely tax deductable as long as your intention is to eventually turn a profit. It is extremely common for business to do poorly or fail.

Most people dont waste money for fun, and the deductions are basically never worth the cost. (why would someone spend 100k on a business to save 25k on taxes? they would still net $-75k)

Also, if you continually loose money over many years, the IRS may question if it is a legitimate business or a hobby for personal gain.