Farming and Ranching


Growing any crop or the raising of animals is a very difficult task. There are many things that have to line up and you have to get correct for you to have a profitable farming operation.

As the IRS sees it, farming is the cultivation, operation of, or management of a farm for profit either as the owner or as a tennant. A farm includes livestock, dairy, poultry, fish, fruit and truck farms. It also includes ranches, ranges or orchards and groves.

There are many tricks of the trade when it comes to farming. The practitioners that have been doing farm related work are the only source of what is really happening with farm taxation. If you leave your farm tax decisions to a general practice tax practitioner you are going to be unhappy with that decision.

The problem is that farm taxation, when done right, is complex and complicated. No other business operates the way that a farm does. The choices you make or forget to make and the choices that you are unaware of my cripple your organization.

There is little writen about farm taxation. It like farming itself is passed on from one generation to the other generation. Decisions as simple of what entity choice do I make can be crutial to getting a favorable outcome when you complete your tax return.

Tax planning should be done by and experienced and seasoned farm knowledgeable tax firm. Nothing less or you will pay the price for this short cut.

IRS offers little information about farm accounting, they will never tell you the nitty gritty details in hopes that you remain unaware. Do not underestimate the IRS ability to audit and evaluate your farm situation, as they always have an expert somewhere in the country to figure things out or at least start the process.

There are a whole host of farm tax mistakes that are made annually. You can see this by the number of cases that are brought to court each year, not to mention the thousands of cases that are settled with the IRS, often times not in your favor. If you set things up right in the beginning there will be no room for you to have then decide and issue not in your favor. It is a world of complexity. Something as simple as constructive receipt of income can become a problem. Constructive receipt. Income is constructively received when an amount is credited to your account or made available to you without restriction. You do not need to have possession of the income for it to be treated as income for the tax year. You need to have the ability to receive the income. If you authorize someone to be your agent and receive income for you, you are considered to have received the income when your agent receives it. Income is not constructively received if your receipt of the income is subject to substantial restrictions or limitations.


As the owner of a farm, it is far better to do things correctly from the beginning. Set things up so they can be audited by the IRS, when done correctly they have nothing to complain about. You will pass and able to get on with your business.

Farm tax decisions are many. It is a twisting and winding road. You have to do things in the correct order at the correct time in the correct manner to achieve the results that you want. The farming industry is an ideal industry to do some tax planning, follow certain steps then the result is that you are able to minimize your income tax costs.

Take a step in the right direction. Call an experienced, seasoned, reliable tax practitioner today. Call us at Canberra Company 805.962.1040