Publication 225 |
2000 Tax Year |
Business of Farming
For purposes of soil and water conservation expenses, you are in
the business of farming if you cultivate, operate, or manage a farm
for profit, either as owner or tenant. You are not farming if you
cultivate or operate a farm for recreation or pleasure, rather than
for profit. You are not farming if you are engaged only in forestry or
the growing of timber.
Farm defined.
A farm includes stock, dairy, poultry, fish, fruit, and truck
farms. It also includes plantations, ranches, ranges, and orchards. A
fish farm is an area where fish and other marine animals are grown or
raised and artificially fed, protected, etc. It does not include an
area where they are merely caught or harvested. A plant nursery is a
farm for purposes of deducting soil and water conservation expenses.
Farm rental.
If you own a farm and receive farm rental payments based on farm
production, either in cash or crop shares, you are in the business of
farming. If you receive a fixed rental payment not based on farm
production, you are in the business of farming only if you materially
participate in operating or managing the farm. See Landlord
Participation in Farming in chapter 15.
If you get cash rental for a farm you own that is not used in farm
production, you cannot claim soil and water conservation expenses for
that farm.
Example.
You own a farm in Iowa and live in California. You rent the farm
for $125 in cash per acre and do not materially participate in
producing or managing production of the crops grown on the farm. You
cannot deduct your soil conservation expenses for this farm. You must
capitalize the expenses and add them to the basis of the land.
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