Santa Claus and the IRS (http://www.farmgate.uiuc.edu/archive/002795print.html) Any Farmers in the MOLICO or RON Paul group could lower your tax liability by donating your peas and nuts to our non profit. Get Rid Of'em Larry Fairtax Melton Don’t tell the recipient, but the Christmas gift you are presenting to them may benefit you as a farm operator more than it does them. Your tax preparer may have visited with you previously about a gift of grain, and if it ever crossed your mind, now is the time to do it. You have a week left for the gift value, and two weeks left for the tax value. How does it work? Let’s take a look… .. At this time of year, as you are doing some year-end tax planning, _a perspective on commodity gifts_ (http://www.farmdoc.uiuc.edu/legal/articles/ALTBs/ALTB_04-08/ALTB_04-08.html) by agricultural taxation specialist Gary Hoff at the University of Illinois, may prove helpful for you and your tax preparer. A commodity gift by a farmer to a charity, will not be considered as a charitable donation, like a $500 check. And such a cash donation may not even have significant deductibility value to the farmer paying the income tax. However, there are two elements in the donation that will be considered by the Internal Revenue Service. The first element is the production expense that went into production of the commodity. (Here’s one more reason for knowing your cost of production!) You are deducting that expense on your Schedule F, but since you will not be getting any income from the sale of that commodity, you are reducing your income. The second element is the parallel reduction in self-employment income, which is an additional way to reduce your tax liability from the same contribution of a commodity. Issues related to landlords giving away commodities are a bit more complex. And what even is more confounding is the lack of distinction of how involved the landowner is in the operation. One important suggestion by Gary Hoff is to ensure that the lease between the landowner and the operator specifies just how much participation the owner will have in the operation. That may reduce future questions by the IRS or the courts in case something goes awry. Commodity contributions by a landlord are considered as transferring the rent that a landlord would have received to the charity involved. The issues that determine when the landowner gets to deduct the charitable contribution are dictated by when the rent payment was received, not when the grain might have been sold in the following calendar year as may have been the typical practice of timing grain sales. As with any item you read about tax matters, this concludes by saying, discuss the issue with your tax preparer, before you take any action that might affect your tax liability. The final decision should be made in consultation with a professional tax preparer who will be representing your interests in the event of an inquiry from the IRS. Summary: Although IRS regulations and tax court rulings can be complex, they have provided opportunities by farmers to make gifts of commodities to charities that benefit the charity with the opportunity to sell the asset, but also provide an opportunity for the farmer to benefit himself or herself by a reduced tax liability.
_Stu Ellis_ (http://www.farmgate.uiuc.edu/about.html) **************One site keeps you connected to all your email: AOL Mail, Gmail, and Yahoo Mail. Try it now. (http://www.aol.com/?optin=new-dp&icid=aolcom40vanity&ncid=emlcntaolcom00000025) --~--~---------~--~----~------------~-------~--~----~ This is a Free Speech forum. The owner of this list assumes no responsibility for the intellectual or emotional maturity of its members. If you do not like what is being said here, filter it to trash, ignore it or leave. If you leave, learn how to do this for yourself. If you do not, you will be here forever. -~----------~----~----~----~------~----~------~--~---
