Q: If a farmer (corporation) conserves it’s agricultural property
If a farmer (corporation) conserves it’s agricultural property and receives 50% as a cash grant and 50% as a donation assuming the grant proceeds far exceed farming income, and there is no other non-farm income, does the receipt of the grant disqualify the IRS farmer status?
In essence - can the “farmer” deduct the full donation against the grant?
Bruce
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A:
When a farmer, organized as a corporation, conserves its agricultural property and receives a grant that exceeds farming income, the status of "farmer" for IRS purposes can be affected. The IRS defines a "farmer" based on the majority of the income coming from farming activities. If the grant far exceeds the income from farming, this could potentially jeopardize the corporation's ability to maintain its status as a "farmer" under IRS guidelines.
Regarding deductions, the key issue is how the grant and donation are reported. If the cash grant is considered taxable income, and it's not classified as farming income, it could limit the ability to offset the donation against the grant. Deductions for charitable contributions are generally limited to a percentage of the corporation's taxable income, which might affect the extent to which the donation can be deducted.
It would be crucial to carefully evaluate the income sources and how the grant and donation are categorized on the tax return. Consulting with a tax professional can provide guidance specific to the corporation's circumstances, ensuring compliance with IRS rules while maximizing possible deductions.
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