Table of Contents

• Publication 225 - Introductory Material
  • Introduction
    • Tax questions.
    • Ordering forms and publications.
  • What's New for 2005
  • What's New for 2006
  • Reminders
• 1.   Importance of Records
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Benefits of Recordkeeping
  • Kinds of Records To Keep
  • How Long To Keep Records
• 2.   Accounting Methods
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Accounting Methods
    • Family corporation.
    • Tax shelter.
    • Cash Method
    • Accrual Method
    • Farm Inventory
    • Cash Versus Accrual Method
    • Special Methods of Accounting
    • Combination Method
    • Change in Accounting Method
• 3.   Farm Income
  • What's New
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Schedule F
  • Sales of Farm Products
    • Schedule F.
    • Form 4797.
    • Sales Caused by Weather-Related Conditions
  • Rents (Including Crop Shares)
    • Crop Shares
  • Agricultural Program Payments
    • Commodity Credit Corporation (CCC) Loans
    • Conservation Reserve Program (CRP)
    • Crop Insurance and Crop Disaster Payments
    • Feed Assistance and Payments
    • Cost-Sharing Exclusion (Improvements)
    • Payments under the Farm Security and Rural Investment Act of 2002
    • Peanut Quota Buyout Program Payments
    • Other Payments
    • Tobacco Quota Buyout Program Payments
    • Payment to More Than One Person
  • Income From Cooperatives
    • Patronage Dividends
    • Per-Unit Retain Certificates
  • Cancellation of Debt
    • General Rule
    • Exceptions
    • Exclusions
  • Income From Other Sources
    • Sod.
    • Granting the right to remove deposits.
  • Income Averaging for Farmers
    • Elected Farm Income (EFI)
    • How To Figure the Tax
    • Effect on Other Tax Determinations
    • Tax on Investment Income of Child Under 14
    • Alternative Minimum Tax (AMT)
    • Schedule J
• 4.   Farm Business Expenses
  • What's New
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Deductible Expenses
    • Reasonable allocation.
    • Prepaid Farm Supplies
    • Prepaid Livestock Feed
    • Labor Hired
    • Repairs and Maintenance
    • Interest
    • Breeding Fees
    • Fertilizer and Lime
    • Taxes
    • Insurance
    • Rent and Leasing
    • Depreciation
    • Business Use of Your Home
    • Truck and Car Expenses
    • Travel Expenses
    • Marketing Quota Penalties
    • Tenant House Expenses
    • Items Purchased for Resale
    • Other Expenses
  • Domestic Production Activities Deduction
  • Capital Expenses
    • Forestation and reforestation costs.
  • Nondeductible Expenses
    • Personal, Living, and Family Expenses
    • Other Nondeductible Items
  • Losses From Operating a Farm
    • At-Risk Limits
    • Passive Activity Limits
  • Not-for-Profit Farming
    • Using the presumption later.
    • Category 1.
    • Category 2.
    • Category 3.
• 5.   Soil and Water Conservation Expenses
  • Introduction
  • Topics - This chapter discusses:
  • Business of Farming
  • Plan Certification
  • Conservation Expenses
    • Water well.
  • Assessment by Conservation District
    • Assessment for Depreciable Property
  • 25% Limit on Deduction
    • Net operating loss.
  • Choosing To Deduct
  • Sale of a Farm
• 6.   Basis of Assets
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Cost Basis
    • Real Property
    • Allocating the Basis
    • Uniform Capitalization Rules
  • Adjusted Basis
    • Increases to Basis
    • Decreases to Basis
  • Basis Other Than Cost
    • Sale of property.
    • Basis for depreciation.
    • Taxable Exchanges
    • Involuntary Conversions
    • Nontaxable Exchanges
    • Property Received as a Gift
    • Property Transferred From a Spouse
    • Inherited Property
    • Property Distributed From a Partnership or Corporation
• 7.   Depreciation, Depletion, and Amortization
  • What's New
  • Reminders
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Overview of Depreciation
    • What Property Can Be Depreciated?
    • What Property Cannot Be Depreciated?
    • When Does Depreciation Begin and End?
    • Can You Use MACRS To Depreciate Your Property?
    • What Is the Basis of Your Depreciable Property?
    • How Do You Treat Improvements?
    • Do You Have To File Form 4562?
    • How Do You Correct Depreciation Deductions?
  • Section 179 Deduction
    • What Property Qualifies?
    • What Property Does Not Qualify?
    • How Much Can You Deduct?
    • How Do You Elect the Deduction?
    • When Must You Recapture the Deduction?
  • Claiming the Special Depreciation Allowance
    • What Is Qualified Property?
    • How Much Can You Deduct?
    • How Can You Elect Not To Claim the Allowance?
  • Figuring Depreciation Under MACRS
    • Which Depreciation System (GDS or ADS) Applies?
    • Which Property Class Applies Under GDS?
    • What Is the Placed-in-Service Date?
    • What Is the Basis for Depreciation?
    • Which Recovery Period Applies?
    • Which Convention Applies?
    • Which Depreciation Method Applies?
    • How Is the Depreciation Deduction Figured?
    • How Do You Use General Asset Accounts?
    • When Do You Recapture MACRS Depreciation?
  • Additional Rules for Listed Property
    • What Is Listed Property?
    • Can Employees Claim a Deduction?
    • What Is the Business-Use Requirement?
    • Do the Passenger Automobile Limits Apply?
    • What Records Must Be Kept?
  • Depletion
    • Who Can Claim Depletion?
    • Figuring Depletion
  • Amortization
    • Business Start-Up Costs
    • Reforestation Costs
    • Pollution Control Facilities
    • Section 197 Intangibles
• 8.   Gains and Losses
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Sales and Exchanges
    • Determining Gain or Loss
    • Like-Kind Exchanges
    • Transfer to Spouse
  • Ordinary or Capital Gain or Loss
    • Section 1231 transactions.
    • Capital Assets
    • Noncapital Assets
    • Hedging (Commodity Futures)
    • Livestock
    • Converted Wetland and Highly Erodible Cropland
    • Timber
    • Sale of a Farm
    • Foreclosure or Repossession
    • Abandonment
• 9.   Dispositions of Property Used in Farming
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Section 1231 Gains and Losses
    • Nonrecaptured section 1231 losses.
  • Depreciation Recapture
    • Section 1245 Property
    • Section 1250 Property
    • Installment Sale
    • Other Dispositions
  • Other Gains
    • Exceptions.
    • Amount to report as ordinary income.
    • Applicable percentage.
    • Amount to report as ordinary income.
    • Applicable percentage.
• 10.   Installment Sales
  • What's New
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Installment Sale of a Farm
  • Installment Method
    • Cancellation.
    • Transfer due to death.
    • More information.
    • When to elect out.
    • More information.
  • Figuring Installment Sale Income
    • Selling price.
    • Adjusted basis for installment sale purposes.
    • Adjusted basis.
    • Selling expenses.
    • Depreciation recapture.
    • Gross profit.
    • Contract price.
    • Gross profit percentage.
    • Sale of depreciable property.
    • Selling price reduced.
  • Payments Received or Considered Received
    • Mortgage less than basis.
    • Mortgage more than basis.
    • Exception.
    • Fair market value (FMV).
    • Third-party note.
    • Bond.
    • Buyer's note.
    • More information.
  • Example
    • Section 1231 gains.
    • Depreciation recapture and gain on cattle.
    • Summary.
• 11.   Casualties, Thefts, and Condemnations
  • What's New
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Casualties and Thefts
    • Deductible losses.
    • Nondeductible losses.
    • Progressive deterioration.
    • Decline in market value of stock.
    • Mislaid or lost property.
    • Farming Losses
    • How To Figure a Loss
    • Deduction Limits on Losses of Personal-Use Property
    • When Loss Is Deductible
    • Proof of Loss
    • Figuring a Gain
  • Other Involuntary Conversions
    • Condemnation
    • Irrigation Project
    • Livestock Losses
    • Tree Seedlings
  • Postponing Gain
    • Exception.
    • Related persons.
    • Replacement Property
    • Replacement Period
    • How To Postpone Gain
  • Disaster Area Losses
    • Who is eligible.
    • Covered disaster area.
  • Reporting Gains and Losses
• 12.   Self-Employment Tax
  • What's New for 2005
  • What's New for 2006
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Why Pay Self-Employment Tax?
  • How To Pay Self-Employment Tax
    • Replacing a lost social security card.
    • Name change.
    • Penalty for underpayment of estimated tax.
  • Who Must Pay Self-Employment Tax?
    • Limited partner.
    • Community property.
  • Figuring Self-Employment Earnings
    • Landlord Participation in Farming
  • Methods for Figuring Net Earnings
    • Regular Method
    • Farm Optional Method
    • Nonfarm Optional Method
    • Using Both Optional Methods
  • Reporting Self-Employment Tax
• 13.   Employment Taxes
  • What's New for 2006
  • Reminder
  • Important Dates
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Farm Employment
  • Family Employees
  • Crew Leaders
  • Social Security and Medicare Taxes
    • Religious exemption.
    • Wage limit.
  • Federal Income Tax Withholding
    • New Form W-4 for 2006.
  • Advance Payment of Earned Income Credit
  • Reporting and Paying Social Security, Medicare, and Withheld Federal Income Taxes
    • Electronic Federal Tax Payment System (EFTPS).
  • Federal Unemployment (FUTA) Tax
    • Reporting and Paying FUTA Tax
• 14.   Excise Taxes
  • What's New for 2005
  • Reminders
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Fuels Used in Farming
    • Buyer of fuel, including undyed diesel fuel or undyed kerosene after September 30, 2005.
    • Undyed diesel fuel, undyed kerosene, aviation-grade kerosene, and kerosene used in aviation.
    • Custom application of fertilizer and pesticide.
    • Fuel not used for farming.
  • Dyed Diesel Fuel and Dyed Kerosene
  • Fuels Used in Off-Highway Business Use
  • Fuels Used for Household Use or Other Than as a Fuel
  • How To Claim a Credit or Refund
    • Credit only.
    • Claiming a Credit
    • Claiming a Refund
  • Including the Credit or Refund in Income
• 15.   Estimated Tax
  • Introduction
  • Topics - This chapter discusses:
  • Useful Items - You may want to see:
  • Special Estimated Tax Rules for Qualified Farmers
    • Qualified Farmer
    • Special Rules for Qualified Farmers
  • Estimated Tax Penalty for 2005
• 16.   Sample Return
  • Preparing the Return
    • Schedule F (Form 1040)
    • Form 4562 - Depreciation and Amortization
    • Schedule SE (Form 1040) Self-Employment Tax
    • Form 4684-Casualties and Thefts
    • Form 4797- Sales of Business Property
    • Schedule D (Form 1040) Capital Gains and Losses
    • Form 1040, Page 1
    • Form 1040, Page 2
    • Schedule J (Form 1040) Income Averaging for Farmers and Fishermen
    • Completing the Return
• 17.   How To Get Tax Help
• Publication 225 - Additional Material
• Index