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. See Treas. Reg. §1.61-4(d). Individuals, trusts, partnerships, S corporations, LLCs taxed as partnerships, and single-member LLCs with income derived from these activities report their “farm income” on IRS Form 1040, Schedule F, Profit and Loss from Farming. The term “farm” “embraces the farm in the ordinarily accepted sense,” and includes livestock, dairy, poultry, fish, fruit, and truck farms. It also includes plantations, ranches, ranges, and orchards and groves. See Publication 225. If an individual’s business income is not derived from farming, it will generally be reported instead of IRS Form 1040, Schedule C, Profit and Loss from Business. Crop share landlords who do not materially participate in the farming activity report their income on IRS Form 4835, Farm Rental Income and Expenses. Typical cash rent landlords are not farmers. They report their income on IRS Form 1040, Schedule E, Supplemental Income and Loss.
Example 1: George operates a corn and soybean farm, which has a long-term average of grossing $750,000 in receipts. George is a farmer, and will report his income on a Schedule F.
Example 2: Jose raises 8,000 market hogs annually in an integrated system. The integrator provides the feeder pigs, Jose provides husbandry and facilities to raise these animals to market weight, and the integrator picks the animals up for processing. Jose contracts with the integrator, on a “pig-space” basis with the possibility of performance premiums based on death loss and feed efficiency. Jose is a farmer even though he does not own the animals. He provides the necessary resources for growth and care. Jose will report his income on a Schedule F.
Example 3: Ginger has two specially constructed greenhouses in which she raises mushrooms. Ginger generates $25,000 in gross receipts and earns $10,000 in net profits. Ginger is a farmer, and she will report her income on a Schedule F.
Example 4: Rosa raises tilapia in ponds. The fish are harvested and go to market as live fish (shipped in special tanker trucks), fresh, and frozen. For IRS purposes, Rosa files Schedule F to report her income and expenses from her fish farming business.
Example 5: Thom rents all the land upon which he raises row crops. Thom is engaged in the business of farming even though he does not own any land. Thom uses Schedule F to report his income and expenses.
Example 6: Jorge operates a custom farming contracting business. He and his employees provide fee-based planting, cultivation and harvesting services to clients. These contracted services are necessary to raise crops and harvest them, Jorge’s business is not a “farming” business because he does not own the planted crops. Jorge’s business is a “service” business providing landowners the means to have their land cultivated without the need to own machinery and employ labor. Jorge reports his income and expenses on a Schedule C.
Example 7: Mary leases 250 acres of farmland to Sean and Susan, who grow row crops on the land. Mary receives $300 per acre under the rental arrangement. She does not participate in the farming business. Mary is not a farmer and will report her rental income on Schedule E.
Example 8: John rents his cropland to Gus who plants and harvests soybeans. John and Gus enter into a crop share agreement under which John materially participates. John is a farmer and will report his crop share income on Schedule F.
These non-exhaustive examples illustrate who is and who is not a farmer for purposes of filing a Schedule F. The Internal Revenue Code (I.R.C.), however, has other definitions, which may apply for different purposes.
The Center for Agricultural Law and Taxation is a partner of the National Agricultural Law Center (NALC) at the University of Arkansas System Division of Agriculture, which serves as the nation’s leading source of agricultural and food law research and information. This material is provided as part of that partnership and is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture.