Life Sciences Commons^™

Paying Wages In Kind: Proposed Repeal Of The Provision, Neil Harl

Neil E. Harl

Tucked away in a remote corner of the Revenue Act of 1992 lies the long-expected Congressional challenge to the practice of payment of wages in kind to agricultural labor. Barring a major lobbying effort, the provision is likely to be aboard the next major tax bill to pass the Congress.

Paying Wages In Kind, Neil Harl

Neil E. Harl

In general, wages paid in kind rather than in cash to agricultural labor are not subject to FICA or FUTA taxes. In addition, agricultural labor is exempt from income tax withholding except as the payment constitutes "wages." Wages paid "in any medium other than cash for agricultural labor" are exempt from the term "wages." Recent rulings (and apparent Internal Revenue Service scrutiny of the practice) have focused attention on the issue although neither the practice of paying wages in kind nor the authority for unique tax treatment of such in kind payments is new.

Income Tax Aspects Of Property Transfers, Roger A. Mceowen, Neil E. Harl

Neil E. Harl

Property can be transferred by sale or gift during life, or by inheritance at death. The income tax consequences of each type of transfer are different.

Repossessing Land, Neil E. Harl

Neil E. Harl

Before enactment of I.R.C. § 1038 in 1964, repossession of real property following default under an installment sale transaction generally resulted in substantial gain or loss, usually to the extent of the difference between the fair market value of the property at the time of repossession and the income tax basis of the installment obligation. Repossession was essentially treated as a disposition of the obligation.

Revenue Act Of 1992 (Proposed) Summary Of Selected Provisions, Neil Harl

Neil E. Harl

The legislation would extend on a permanent basis the targeted jobs credit and would restore individuals aged 23 and 24 to the category of economically disadvantaged youth. The provision would be effective for individuals who begin work for an employer after June 30, 1992.

Making Valid Dislaimers, Neil E. Harl

Neil E. Harl

The disclaimer is easily one of the most useful devices in the estate planner's kit. Using disclaimers artfully, the planner can sculpt a dispositive pattern after death has occurred and all variables are known including asset values, asset ownership patterns, needs of the family (at least as of the time of the decedent's death) and state of the tax system. All of these factors may be shrouded in uncertainty at the time the estate is planned before death and the instruments are drafted. Disclaimers permit a late opportunity to carry out the testator's wishes and to do so in a …

Handling Employee Expenses, Neil E. Harl

Neil E. Harl

Although farm and ranch employees may incur a range of different kinds of expenses for which reimbursement may be sought, the most common problem situation involves reimbursement for automobile expense. This article discusses the reporting of amounts paid as automobile reimbursement and amounts paid under an "accountable plan."

Interest Rates On Installment Sales, Neil E. Harl

Neil E. Harl

Since 1964, a minimum interest rate has been imposed on installment sales. More precisely, a part of each principal payment under an installment sale is treated as interest rather than sales price (and the total sales price is correspondingly reduced) if interest of less than the prescribed rate is specified.

Disclaiming The Survivorship Interest In Joint Tenancy Property, Neil E. Harl

Neil E. Harl

No abstract provided.

Family Estate Trusts, Neil E. Harl

Neil E. Harl

The recent attention to revocable living trusts has led to some confusion with a far less useful concept, the trust referred to variously as the "family estate" trust, "pure" trust, and "constitutional" trust. The latest version of these trusts, all of which are valued as substantially less than worthless, is the two-trust off-shore version or the foreign tax haven double trust. The trusts are mostly sold door-to-door through local contacts who tout the trusts as devices to solve all of one's estate-planning problems. The trusts are purportedly irrevocable, generally for a 25-year term.

Cash Reporting, Neil E. Harl

Neil E. Harl

The enactment of tighter reporting rules in 1990, the issuance of amended regulations, and the issuance of temporary regulations have modified the cash reporting requirements sufficiently to affect far more firms than was the case previously. The most significant expansion in scope of the requirement — the change in definition of "cash" — applies to amounts received on or after February 3, 1992.

Handling Commodity Futures Transactions, Neil E. Harl

Neil E. Harl

In the same manner as other merchants and manufacturers, farm and ranch taxpayers buy and sell commodity futures to hedge against fluctuating prices. Likewise, farm and ranch taxpayers buy and sell commodity futures as speculators. The principal matter of concern from an income tax perspective in the farm and ranch area is the line between hedging and speculation.

Generation Skipping—Planning Principles, Neil E. Harl

Neil E. Harl

For may farm and ranch families, generation skipping is not part of their estate plans. However, for those wishing to limit the right of one or more succeeding generations to manage the property or the right to dispose of the property, generation skipping may figure into the estate planning effort. For the latter group, several additional guidelines or planning principles should be considered.

Eligibility For Medicaid Benefits, The "Assets" Test, Neil E. Harl

Neil E. Harl

Few topics merit the attention now being focused on health care. While there is major concern about the cost of health insurance and health care costs, many older individuals are deeply concerned about nursing home costs and have seen the estates of friends or relatives reduced sharply by such expenses.

Some are tempted to attempt to plan their estates deliberately to qualify for Title XIX Medicaid benefits for health care. This article discusses briefly the rules governing Title XIX eligibility.

Generation Skipping—Transfers Subject To Tax, Neil E. Harl

Neil E. Harl

For centuries, generation skipping has been utilized by wealthy property owners and those lacking confidence in succeeding generations to manage and conserve family wealth, at least to the extent allowed by the rule against perpetuities. Until 1976, the U.S. federal estate and gift tax system did not take particular note of generation skipping as property owners were free to establish generation skipping arrangements with the usual federal estate or gift tax consequences as to the transferor, but with no further transfer tax consequence until gift by or death of the holders of the remainder interest. The Tax Reform Act of …

Generation Skipping—The $1 Million Exemption, Neil E. Harl

Neil E. Harl

For most farm and ranch families, the most significant feature of the generation skipping transfer tax (GSTT) is the $1 million exemption per transferor. An exemption of $2 million was available through 1989 for transfers to grandchildren.

Capitalizing Preproductive Period Expenditures, Neil Harl

Neil E. Harl

Few have forgotten the provision in the Tax Reform Act of 1986 requiring the capitalization of preproductive period expenditures for animals or crops having a preproductive period of more than two years. The provision was repealed as to animals in the Technical and Miscellaneous Revenue Act of 1988. However, problems may now be encountered by those who elected out of the provision before 1989.

Divisive Corporate Reorganizations, Neil E. Harl

Neil E. Harl

Repeal of the more favorable corporate liquidation options in 1986 and the expiration of the phase-out for small corporations at the end of 1988 have narrowed the range of workable choices for dealing with corporations that have outlived their usefulness. One possibility, for those motivated by a desire to separate shareholders who prefer not to be associated together any longer in the same corporation, is a divisive, type D, corporate reorganization.

Cash Accounting For Farm And Ranch Corporations, Neil E. Harl

Neil E. Harl

As a new taxpayer, a farm or ranch corporation may elect the cash or accrual methods of accounting if the corporate books are so kept and the method clearly reflects income. Indeed, IRS has ruled that a corporation may report on the cash method of accounting even though books are kept on the accrual method if the corporation maintains work papers reconciling accrual method book income to cash method taxable income. The method of accounting should be elected clearly on the initial corporate income tax return.

Cautionary Note On Scin's, Neil Harl

Neil E. Harl

The concept of self-cancelling installment notes or SCIN's grew out of a 1980 Tax Court decision holding that an arrangement involving the cancellation at the death of the seller of the remaining payments due on an installment obligation would not be treated as a transfer with a retained life estate. The publication in 1986 of Rev. Rul. 86-723 essentially validated the concept and provided guidelines for classifying arrangements as private annuities, SCIN's or conventional installment sales. Since 1986, SCIN's have come to be viewed as a useful planning device in some settings. In particular, many view SCIN's as superior to …

Funding Revocable Living Trusts, Neil E. Harl

Neil E. Harl

Without much doubt, the transfer of assets to the trust is the most critical part of the formation of a revocable living trust. Inasmuch as all of the grantor's property should be conveyed to the trust, the obvious question is whether the transfer triggers adverse consequences to the grantor. In general, conveyance of property to a revocable inter vivos trust can be accomplished without negative consequences but the property inventory should be subjected to an itemby- item review before the actual transfer occurs. Here are the major points to consider.

Forgiving Principal In A Purchase Price Reduction, Neil E. Harl

Neil E. Harl

For purchasers of property unable to make payments as required by the obligation, a purchase price reduction may be a possible solution. If the debt of an original purchaser of property is reduced by the original seller of the property, the adjustment is treated as a purchase price adjustment and not as a discharge of indebtedness if the debtor is solvent.

Avoiding Self-Employment Tax, Neil Harl

Neil E. Harl

Two recent private letter rulings issued about a month apart in late 1991 have provided additional guidance on the IRS national office position on two of the strategies used to avoid self-employment tax. In both rulings, the IRS position was adverse to the taxpayers.

Claiming Motor Vehicle Deductions, Neil Harl

Neil E. Harl

A taxpayer may, on a yearly basis, deduct an amount equal to either (1) the business standard mileage rate (at 28 cents per mile for all business miles for 1992) times the number of business miles traveled or (2) the actual costs (both operating and fixed) paid or incurred by the taxpayer allocable to business miles.

Research Needs And Challenges In The Few System: Coupling Economic Models With Agronomic, Hydrologic, And Bioenergy Models For Sustainable Food, Energy, And Water Systems, Catherine L. Kling, Raymond W. Arritt, Gray Calhoun, David A. Keiser, John M. Antle, Jeffery G. Arnold, Miguel Carriquiry, Indrajeet Chaubey, Peter Christensen, Baskar Ganapathysubramanian, Philip Gassman, William Gutowski, Thomas W. Hertel, Gerritt Hoogenboom, Elena Irwin, Madhu Khanna, Pierre Mérel, Daniel J. Phaneuf, Andrew Plantinga, Stephen Polasky, Paul Preckel, Sergey Rabotyagov, Ivan Rudik, Silvia Secchi, Aaron Smith, Andrew Vanloocke, Calvin Wolter, Jinhua Zhao, Wendong Zhang

Andy VanLoocke

On October 12–13, a workshop funded by the National Science Foundation was held at Iowa State University in Ames, Iowa with a goal of identifying research needs related to coupled economic and biophysical models within the FEW system. Approximately 80 people attended the workshop with about half representing the social sciences (primarily economics) and the rest from the physical and natural sciences. The focus and attendees were chosen so that findings would be particularly relevant to SBE research needs while taking into account the critical connectivity needed between social sciences and other disciplines. We have identified several major gaps in …

Revenue Reconciliation Act Of 1990, Neil E. Harl

Neil E. Harl

The legislation imposes a 31 percent marginal tax rate above the 15 and 28 percent marginal tax rate brackets. The phase-outs of the benefits from the 15 percent rate and the personal exemption amounts (creating the so-called "bubble") are repealed. The new 31 percent rate begins at the same level of taxable income as the phase-out range of prior law.

Turn Over Of Assets To Creditors, Neil E. Harl

Neil E. Harl

From 1983 to 1989, US agricultural debt dropped by about $60 billion as debts were discharged in bankruptcy, obligations were restructured with debt written off and property was deeded back to creditors. The resulting tax consequences created highly significant income tax burdens for debtors and contributed to various proposals for debtor relief from tax liability. However, except for relief from alternative minimum tax liability stemming from capital gains and a new solvent farm debtor rule for discharge of indebtedness, farm and ranch debtors were consigned to working through their debt problems within existing tax law.

Type Of Lease For An S Corporation, Neil E. Harl

Neil E. Harl

Since enactment of the S corporation concept in 1958, it has been important to give careful thought to the kind of lease entered into by S corporations as landowners. In the years since the major amendments to Subchapter S of the Internal Revenue Code in 1982, The type of lease has been less important for some S corporations but it is still a major checklist item for S corporation planning.

Tax-Free Incorporation, Neil E. Harl

Neil E. Harl

For several years, relatively little change had been made in the rules governing the tax-free exchange of property to a corporation. The questions raised in the 1970s about how to handle basis allocation between stock and debt securities had been answered. The problems of distinguishing debt and equity securities had not been resolved but that issue seemed to be less of a burning concern with IRS than it was until the proposed regulations issued in 1980 were revoked in 1983 before becoming final.

Soil Expenditures, Neil E. Harl

Neil E. Harl

Historically, expenditures to improve the productivity of soil have been viewed as capital in nature and not deductible. Over the past four decades Congress has acted to make some expenditures deductible if specified conditions are met.