Schedule F and Form 4835

[Dan]

Are you able to file both a Schedule F and Form 4835 in the same tax year?  

For example a farmer has turned his farm ground over to a tenant to farm.  That would go on Form 4835.

The same farmer has ground in the CRP program in which he materially participates.  That would go on Schedule F.

Am I correct in the above examples?

 

[TaxmannEA]

Yes, it's possible. I have several people in the same position.

[DANRVAN]

The issue would be allocating expense (property taxes etc.) between the forms.  Especially if CRP is subject to SE tax.  If farmer is on SS then no SE tax.

[RitaB]

16 hours ago, Dan said:

Are you able to file both a Schedule F and Form 4835 in the same tax year?  

For example a farmer has turned his farm ground over to a tenant to farm.  That would go on Form 4835.

The same farmer has ground in the CRP program in which he materially participates.  That would go on Schedule F.

Am I correct in the above examples?

 

Yes, you can have both forms, certainly,  I will add that If tenant pays farmer a flat rate (if farmer's pay is not based upon the production of the tenant) you'd use Sch E instead of Form 4835. You probably know that, but somebody else might need that info later on.

[Dan]

21 hours ago, TaxmannEA said:

Yes, it's possible. I have several people in the same position.

Are you treated as materially participating in a farming activity if you materially participated for 5 or more of the eight years before you turned over the farming to a tenant?  In other words, can you file schedule F for 5 years after you turn over the farming business to a tenant or must you use Form 4835 the first year?  The only test you meet is test 5 of the material participation test.

[TaxmannEA]

The problem with CRP payments is that the regs state that they need to be reported on Sch F. Early on, some farmers were putting the CRP payments on Sch E to avoid SE tax.   If I have a farmer who rents his crop ground out but has CRP paid to him, I'll report the CRP on Sch F and the rent on Sch E or 4835 depending on circumstances.  ( Cash rent or share-crop.) If the TP is over 65, there is no SE tax on the CRP.  I also have farmers such as my self who rent part of the farm out and continue to raise livestock or crop a small remainder. These will file both forms as they are involved in both activities.  I also have one client who has never farmed but who bought a small farm which had a CRP contract in place. I report those payments on his Sch E with cash rent paid on a portion of the acreage as he has never farmed and the intent of the reg requiring inclusion on the F doesn't apply in that case.