July 2017

July 2017

Deducting Farm Expenses: An Overview

Farmers, like other business owners, may deduct “ordinary and necessary expenses paid . . . in carrying on any trade or business.” IRC § 162.  In agriculture, these ordinary and necessary expenses include car and truck expenses, fertilizer, seed, rent, insurance, fuel, and other costs of operating a farm. Schedule F itemizes many of these expenses in Part II. Those properly deductible expenses not separately listed on the Form are reported on line 32. Following is an overview of key expense deductions for farmers.

Car and Truck Expenses. Farmers, like other business owners, have the option to either (1) deduct the actual cost of operating a truck or car in their business or (2) deduct the standard mileage rate for each mile of business use.

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Reporting Farm Income: An Overview

Preparing tax returns for farmers and ranchers requires specialized knowledge of tax rules and provisions that apply only to those in the business of farming. Individuals, partnerships, and trusts and estates generally report farm income and expenses on Form 1040, Schedule F. Taxpayers use this form to calculate net gain or loss from farming. Gains or losses from the sale of farm assets are usually reported on Form 4797.

Whether income is “farm income” depends upon the operations being conducted and the activities of the person conducting it. Different definitions of farming apply to different tax provisions. This article highlights key rules for reporting farm income.

For tax purposes generally, all individuals, partnerships, or corporations that cultivate, operate, or manage farms for gain or profit, either as owners or tenants, are farmers. Treas. Reg. §1.61-4(d). Income derived from these activities is “farm income” reported on Schedule F. The term “farm” “embraces the farm in the ordinarily accepted sense,” and includes stock, dairy, poultry, fruit, truck farms, plantations, ranches, and all land used for farming operations.

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Iowa Supreme Court Says Drainage District Cannot Enforce 40-Year-Old Injunction

On June 30, 2017, the Iowa Supreme Court ruled that a 1977 injunction requiring a railway company to rebuild a dike, expired under a 20-year limitations period set forth in Iowa Code § 614.1(6). Consequently, a drainage district’s action seeking to enforce that injunction was dismissed.

The case arose because of ongoing drainage problems created by a railroad bridge constructed in 1872. The bridge allows railroad tracks to pass over Whiskey Creek in Louisa County. During heavy rains, sediment and debris has long plugged the channel under the bridge, causing water to flood and damage fields to the north of the bridge. Although railway companies responsible for the bridge originally built a dike to solve the problem, the dike has repeatedly failed. To continue reading, click here.


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CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.

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