DONATING GRAIN TO A CHARITY

[Marie]

can a farmer who raises grain or feeder calves donate these to a charity and let the charity sell?  Then the farmer does not have to report the income, and of course, does not get to take the charitable deduction on Sch A.  Does anyone have any info on doing this if it is allowed? 

[kathyc2]

Does this help?  https://www.calt.iastate.edu/blogpost/gifting-commodities-instead-cash-often-reduces-taxes

 

[Marie]

YES, I READ THAT, TOO.  GOOD INFO 

[DANRVAN]

I have not seen an authoritative cite that either allows it or disallows it, including https://www.calt.iastate.edu/blogpost/gifting-commodities-instead-cash-often-reduces-taxes posted above.

While the article does refer to some regs in regards to the the related expenses of the donated crops, it does not cite any authority relating to "rules for gifting a raised commodity directly to the charity" which it describes in the article.

 

[Max W]

see Sec 1.170A-1.  

[DANRVAN]

1 hour ago, Max W said:

see Sec 1.170A-1.  

I have not seen any reference in Sec 1.170A-1 that allows a charitable contribution as a reduction of gross income vs  reporting on Schedule A.

In fact 1.170A-1 refers back to sec 170 which states "A charitable contribution shall be allowable as a deduction only if verified under regulations prescribed by the Secretary."

Off the top of my head, I am only aware of one case where a charitable contribution is  allowed as a reduction of income which is a Qualified Charitable Distribution, other than a special rule for C Corps.

While Sec 1.170A-1 does give an example of grain to a charity, it does not imply that the donated grain was omitted from income vs reported on Schedule A.

 

[DANRVAN]

I see a potential issue with assignment of income.  It will probably depend on the facts and circumstances.

[mcbreck]

If you donate cash from the sale, the profit would have been subject to MEDA and SS taxes whereas if you donate product you avoid those taxes? Where else does the IRS allow that?

[DANRVAN]

On 1/28/2025 at 12:04 PM, Marie said:

Then the farmer does not have to report the income

I was sceptical, but case laws says that is correct; a transfer of an appreciated asset is not an assignment of income.   HAROLD N. SHELDON, 62 TC 96, 04/25/1974

"An operating farmer who donates crops to a charity before he recognizes income from them is not required to include the value of the crops in his income.2 The farmer has merely assigned to the charity a property asset which has appreciated in value. Neither the harvesting nor the donative transfer of the product of his capital and services is a taxable event. See Campbell v. Prothro, 209 F.2d 331 (C.A. 5, 1954); Stuart A. Rogers, 38 T.C. 785 (1962); and White v. Brodrick, 104 F.Supp. 213 (D.Kan. 1952), appeal dismissed per curiam 198 F.2d 751 (C.A. 10, 1952); cf. Tatum v. Commissioner,  400 F.2d 242, 246-247 (C.A. 5, 1968), affirming"

[Marie]

probably should write up a gift deed?  calt.iastate mentions livestock.  I believe feeder calves would be the same as grain according to them. 

Do you agree? 

[DANRVAN]

You need documentation that legal ownership was transferred to the charity.