farmer renting land

[bstaxes]

Farmer is renting land from owner. The owner wants only one rent check for land and house per month. Farmer rents out house and collects rent. Farmer pays rent to owner for house and land. I am thinking rent could on go sch f as other income and expense the total rent. I really don't want to sch e the rent because the farmer doesn't own it and there would be no expenses against the rent. Owner pays taxes and does repairs. Farmer is like a middle man. Any thoughts. Boy this is starting out as a crazy tax season.

[Lynn EA USTCP in Louisiana]

Farmer is renting land from owner. The owner wants only one rent check for land and house per month. Farmer rents out house and collects rent. Farmer pays rent to owner for house and land. I am thinking rent could on go sch f as other income and expense the total rent. I really don't want to sch e the rent because the farmer doesn't own it and there would be no expenses against the rent. Owner pays taxes and does repairs. Farmer is like a middle man. Any thoughts. Boy this is starting out as a crazy tax season.

Have you looked at form 4835 (farm rental income and expenses; (Crop and Livestock Shares (Not Cash) Received by Landowner (or Sub-Lessor)) (Income not subject to self-employment tax)) and its instructions?

Lynn Jacobs, EA, NP

Kenner, LA

[bstaxes]

Client is the farmer. Form 4835 won't work because farmer is receiving the rent from the house and depositing it in his check book and writing 1 check for land and house to the owner each month. Farmer is not receiving crops, farmer is receiving cash.

Thanks Lynn for the suggestion and trying.

[jainen]

>>rent could on go sch f as other income and expense the total rent<<

In my opinion that's a reasonable approach if the house rent does not represent a major part of the total revenue or profit. But it could result in paying SE tax on rental income, which in my opinion may not be in the client's best interest.

[OldJack]

Quote from heading of 1040 Sch-E instructions:

>>Use Schedule E (Form 1040) to report income or loss from rental real estate, royalties,

partnerships, S corporations, estates, trusts, and residual interests in REMICs.<<

The rental of the house should be reported on 1040 Sch-E, page 1. There is no requirement that the taxpayer own the property in order to report rental income from real estate. Of course instructions refer to owning real estate as that is the common taxpayer situation.

[kcjenkins]

I too would put the rent on Sch E. And the rent paid for the house on the Rental expenses, so that it zeros out, or close, depending on house repairs, etc. No need to pay SE tax on any profit on the house rent, nor to distort the rental expenses on the F.

[bstaxes]

Thanks, I am considering using both sch e and sch f. No problem with the s/e tax because the rental income and the cost to rent are the same amount, it would be a wash.