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1099 PATR


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#1 jasdlm

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Posted 14 March 2010 - 03:32 PM

Client received a 1099-PATR with large numbers in both box 1 and box 3. Client is not a farmer. Client's father gifts grain, etc. to client which co-op sells . . . proceeds to client.

Question: Since client is not a farmer, how do I show this on the 1040. This is my 1st time doing this client's return. Last year, on schedule D, client shows a large capital transaction with a 0 basis. The description is 'gifted grain' with 'various' in the date acquired/date sold fields. I looked through the backup for the return, and there is no backup for the Schedule D transaction, so I have no idea if there was a 1099-PATR.

I am thinking I would put the line 1 amount on schedule B. Can anyone confirm that and/or tell me what to do with the box 3 amount? I will continue to research the issue, but I can't find any good information on reporting this transaction when client is not a farmer.

Client does own land (which was gifted some time ago). Client receives rent for the land, which previous preparer has been reporting on Schedule E. I have put the 2009 land rent on Schedule E, also.

Thanks in advance.

#2 windmill

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Posted 14 March 2010 - 05:14 PM

How about Line 21 of 1040, Other income.

#3 DANRVAN

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Posted 15 March 2010 - 12:55 AM

Sounds like the real issue here is "assignment of income". The courts have been firm on this. The grain income most likely belongs to Dad. That might be why your client was looking for a new tax preparer who is not savy to this income shifting scheme.

#4 DANRVAN

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Posted 15 March 2010 - 09:32 AM

If the son is working with dad on the farming operation, then you might be dealing with a misguided form of commodity wages. This article does a good job of covering the nuts and bolts of how it should work:

http://www.cpaonthew...istings/51.html

#5 jasdlm

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Posted 15 March 2010 - 09:56 AM

Thanks, Danrvan. I really appreciate the help and the article posting. Client does not work on the farm; does not even live in the same state. Client really did receive the money for the sale of the grain (i.e. grain was put in Client's name at the COOP, hence the 1099 PATR in client's name).

Previous preparer put the entire transaction on Schedule D as a long-term transaction, so favorable treatment. I don't think this was right. However, I think that in 2008 the Coop did not generate a 1099-PATR.

I'm not sure what to do now.

Thanks!

#6 Maribeth

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Posted 15 March 2010 - 10:14 AM

Client received a 1099-PATR with large numbers in both box 1 and box 3. Client is not a farmer. Client's father gifts grain, etc. to client which co-op sells . . . proceeds to client.

Question: Since client is not a farmer, how do I show this on the 1040. This is my 1st time doing this client's return. Last year, on schedule D, client shows a large capital transaction with a 0 basis. The description is 'gifted grain' with 'various' in the date acquired/date sold fields. I looked through the backup for the return, and there is no backup for the Schedule D transaction, so I have no idea if there was a 1099-PATR.

I am thinking I would put the line 1 amount on schedule B. Can anyone confirm that and/or tell me what to do with the box 3 amount? I will continue to research the issue, but I can't find any good information on reporting this transaction when client is not a farmer.

Client does own land (which was gifted some time ago). Client receives rent for the land, which previous preparer has been reporting on Schedule E. I have put the 2009 land rent on Schedule E, also.

Thanks in advance.


I would put both the rent and the patr div on Form 4835.

Maribeth

#7 jasdlm

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Posted 15 March 2010 - 02:23 PM

I've put them on the 4835. I'm concerned about the avoidance of SE tax referenced by the link Danrvan posted. Thanks for all the input. Any additional thoughts are certainly welcome.

#8 DANRVAN

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Posted 15 March 2010 - 02:27 PM

I agree that 4835 would be a good place to report the patr div, but would leave land on E unless he is receiving crop shares as rent.

In reguards to the past gift of grain (which should be taxable income to dad and not son), dad is the one who is putting himself on the line by not reporting it. I am not 100% sure what your responsibilty as tax preparer would be.

#9 jasdlm

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Posted 15 March 2010 - 03:09 PM

Danrvan - would you include the Box 3 1099-PATR amount on the 4835, also? This is the much larger number.

#10 kcjenkins

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Posted 15 March 2010 - 03:32 PM

Box 3 is Per Unit Retains. What that means is that he got income that the Co-op held [retained] for payment to him at a later date. Often 20 years away. It IS reported as income in this year. Down the road, when he finally gets it, it will not be taxable, because he's already paid tax on it when 'earned', which is when it's reported to him in box 3. If you are using ATX, I'd make a note of it in his Permanent file. I like to keep up with them, there, for my farmers, especially when they become 'retired' farmers. I agree, by the way, that the income should be on the 4835. The rent, if it is CASH RENT, should be on the E. If it is crop share rent, however, it should be on the 4835.

#11 jasdlm

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Posted 15 March 2010 - 05:46 PM

Thanks so much, KC. I really appreciate you taking time to explain this. Thanks also to Danrvan, Maribeth and Windmill. I will report on the 4835 and keep notes for next year. The rent is not crop share, so I will leave it on Schedule E.




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