Education Commons^™

Materially Participate In The Business To Avoid The Passive Activity Loss Rules, Jc Hobbs

Rural Tax Education

Beginning farmers and ranchers frequently start their agricultural businesses by beginning small and keeping their day jobs. These new business activities must meet certain threshold tests to be considered active rather than passive activities. The passive activity loss rules apply to businesses including farms, limited partnerships, Limited Liability Companies (LLC’s), S Corporations, and C Corporations.

A passive activity is any activity that involves the conduct of a business in which the producer does not materially participate or a rental activity (whether or not the producer materially participates or not). Should a loss occur in such a business, the passive activity …

How Do The At-Risk Rules Apply To A Farm Business?, Jc Hobbs

Rural Tax Education

The majority of farm businesses will not be subject to the at-risk rules. However, when a business is subject to these rules, the deduction of losses will be limited to the amount that the producer has at risk. The amount at risk is the amount the taxpayer could actually lose from the activity. If the at-risk limitation rules do not apply, other rules such as the passive loss rules or the hobby loss rules could still limit loss deductions. The purpose of this article is to explain the at-risk limitations as they apply to both farm and non-farm business activities. …

What Are Deductible Business Expenses?, Dennis Kauppila

Rural Tax Education

Farmers (and all business owners) pay income taxes based on profit. So, it is important to claim ALL legitimate business expenses to not overstate profits. On the other hand, it is illegal to deduct expenses that are not legitimate business expenses.

Sale Of Business Property, Guido Van Der Hoeven

Rural Tax Education

During the course of operating a farm or ranch business, producers will dispose of property (e.g., livestock, equipment, real estate, etc.) used in the business. This can occur in a variety of ways with two common methods being sales of assets and trading (like-kind exchange) of property. The purpose of this fact sheet is to discuss and illustrate correct income tax reporting when business assets are sold.

This discussion also addresses, for income tax purposes, different types of business assets and their tax treatment upon selling them. One common example is the sale of cull breeding animals that were raised …