Dan Posted February 24, 2011 Report Share Posted February 24, 2011 Question: How do you report wheat sold in your name and a cow sold in your name when you are not a farmer? How and where do you report this income on a tax return? What form would you use? Thanks! Quote Link to comment Share on other sites More sharing options...
TaxmannEA Posted February 24, 2011 Report Share Posted February 24, 2011 It would depend how you aquired the wheat and the cow. Need more info. Quote Link to comment Share on other sites More sharing options...
rfassett Posted February 24, 2011 Report Share Posted February 24, 2011 I concur with TaxmannEA, we need more info. I can think of a couple of different scenarios like winnings at a fair. Or, as was the case with my wife's grandfather, back in the 1950's he used to sell his crops or animals in his grandchildrens' names so he did not have to pay tax on the sales. I guess he did not understand the "income assignment" concept. :) Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 24, 2011 Report Share Posted February 24, 2011 Generally, the sale of a gift would either be on Sch D for a capital asset, like the cow, which might have basis, and on Line 21 for the crop sale, since there would be no basis. Quote Link to comment Share on other sites More sharing options...
Dan Posted February 24, 2011 Author Report Share Posted February 24, 2011 Thanks for replying. To some of your questions, the wheat income came as a result of helping father in harvest on the farm. The cow income came as a result of helping father take care of the cows. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted February 24, 2011 Report Share Posted February 24, 2011 So, son is a sharecropper and in the business of farming, yes? Quote Link to comment Share on other sites More sharing options...
Dan Posted February 25, 2011 Author Report Share Posted February 25, 2011 So, son is a sharecropper and in the business of farming, yes? No! The son is not in the business of farming. He has a full-time non farming job. But if you help your father-in-law during your vacation from your full-time job and he pays you in wheat and a cow; how do you report that income. Going back to the previous question. Quote Link to comment Share on other sites More sharing options...
jainen Posted February 25, 2011 Report Share Posted February 25, 2011 >> he pays you in wheat and a cow<< The value of the barter or in kine payments should be reported on a W-2. If you don't have that, file a substitute W-2 with Form 8919. Otherwise treat him as an independent contractor and report the value as earnings on Schedule F. The wheat and cow are capital assets in your client's hands, so also report their immediate or later sale on Schedule D. Quote Link to comment Share on other sites More sharing options...
rfassett Posted February 25, 2011 Report Share Posted February 25, 2011 Dan, your point that son has a day job has no relevance. I have several farmers that have "real" jobs also. I vote for Schedule F. I sense you are attempting to escape self employment tax, but the fact is, he was paid for the work he did. It is either W-2 earnings or self employment earnings. You have no other choice. And I agreee with Jainen (wow, that is twice today) that the subsequent sale of the items go on Schedule D with his basis equal to the amount of income he paid tax on. Quote Link to comment Share on other sites More sharing options...
Pacun Posted February 25, 2011 Report Share Posted February 25, 2011 It turns out a simple question after all. If you perform services in exchange for property, you report the FMV of the property received as income. What you report as income becomes the basis on the property. If you don't perform any services, the property is a gift. Casual services outside of my profession are reported on line 21. If I am walking down the street and Steven Spielberg is filming a horror movie and ask me participate in the movie and he will give me a camera with FMV $200, I will report $200 on line 21. If someone says, prepare my taxes and I will give you this camera with FMV $200, I will report $200 on Schedule C and pay SE taxes. If I sell any of the cameras for $300, I will report $100 personal property gain. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted February 25, 2011 Report Share Posted February 25, 2011 I am with Pacun on this one. Helping out an inlaw does not rise to the level of a trade or business, therefore no SE tax. Line 21. Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted February 25, 2011 Report Share Posted February 25, 2011 >> he pays you in wheat and a cow<< The value of the barter or in kine payments should be reported on a W-2. If you don't have that, file a substitute W-2 with Form 8919. Otherwise treat him as an independent contractor and report the value as earnings on Schedule F. The wheat and cow are capital assets in your client's hands, so also report their immediate or later sale on Schedule D. Love the pun! Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 26, 2011 Report Share Posted February 26, 2011 Pub 15, page 33 Non-cash payments, agricultural labor is Exempt from SS and Medicare and FUTA The issue is not whether he's an employee or not, clearly, for whatever time he worked for the FIL he WAS an employee who was paid for that labor. The significant issue is that when a farmer pays for labor with produce rather than cash, there is a special exemption in the code for the payroll taxes, which give both the farmer and the worker a break. §31.3121(a)(8)-1 Payments for agricultural labor (b ) Payments other than in cash. The term “wages” does not include remuneration paid in any medium other than cash for agricultural labor. Quote Link to comment Share on other sites More sharing options...
Dan Posted February 26, 2011 Author Report Share Posted February 26, 2011 Thanks for all your responses! In the instructions for Schedule C (C-1) It says, "For example, a sporadic activity...does not qualify as a business. To report income from a nonbusiness activity, see the instructions for Form 1040, line 21..." Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 26, 2011 Report Share Posted February 26, 2011 Yes, but such "instructions" tend to be so general that you should never rely on them too heavily. The code sections, however, are THE LAW and you can rely on those cites. That's why I gave you the cite that the instruction is based on. "Sporadic' is not a clear line that you can measure, unfortunately. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted February 26, 2011 Report Share Posted February 26, 2011 The net result will be the same if it goes on line 7 or line 21. While KC is technically correct, there is nothing for the IRS to match to, so why gum up line 7? Put it on line 21 and be done with it. Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
grandmabee Posted February 26, 2011 Report Share Posted February 26, 2011 The net result will be the same if it goes on line 7 or line 21. While KC is technically correct, there is nothing for the IRS to match to, so why gum up line 7? Put it on line 21 and be done with it. Tom Lodi, CA line 7 makes it earned income opposed to other income. could in some cases up EIC, MWP credit Quote Link to comment Share on other sites More sharing options...
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