Form 4835

[S T]

I have a question

Client owns several 1/16 or 1/32% in some Mn Farm Property. all cropland Rental, so I report on schedule E, and then the ag (USDA) payments on 4835 which flows through to Page 2 of Schedule E, I hope that is correct.

Client received a CP 2000 notice for 2009 for Ag (USDA 1099G forms) not reported as we did not receive them from the Farm Mgmt Co. We have since retrieved from the Farm Mgmt co - and they apologized for the oversight in sending he 1099G for reporting.

Here is my question - the CP 2000 notice indicates that the 1099G USDA payments are subject to SE tax. I am calculating in my software program that those payments from USDA (since it is cropland Rental) are not subject to SE Tax.

Who is correct? IRS or ME?

Thanks,

Sandy

[Black Bart]

Sandy,

You are correct -- the USDA "government money" from farm rentals goes on 4835 and is NOT subject to SE (see top of Form 4835 -- it says so there).

About that E; does your guy get crop rent (a % of crop sales) or cash rent (a flat amount)? It doesn't have any bearing on the SE question -- it's the same either way (it's all rent), but I was just curious.

[S T]

Crop USDA 1099G

Hi Bart,
Thanks for the confirmation, Not Subject to SE----- I do so few of these types of returns.

They are on Cropland Cash Rent per Acre, switched from % of Crop Sales in 2007 or 2008.

The 1099 G says CRP Annual Rental and it is such a small amount for my taxpayer as she is only a 1/16 or 1/32 owner. I have two of them for the CP 2000 notice $ 183, and $ 426. Total of $609 that the CP 2000 notice is issued for - so by the time I set IRS straight on the SE, IRS will receive a check of about $ 90

But then the Gov't needs the money so they can spend "wisely" to pay down the debt)

Worse than that, is that I have to file a State resident return and a non-resident return for the change, and that will produce about $ 2 to NC and $2 to MN.

And then, I guess my "services" are not factored.

Ah - another day and week!

Sandy

[Gary2]

Given the small percentage ownership, I guess it's a fair inference that there is no material participation that would force this onto Sch. F. But you might want to look in Pub. 225 under "Landlord Participating in Farming", on page 74, just to be sure.

[S T]

No

Thanks Gary, for the notation and follow up.

No Material Participation - Family Farm with "many family members' my client has little to do with except receive checks. Major decisions - then there are confernce calls, but there is a Very Large Farm Management Company that takes care of all day to day operations.

They are converting to a LLC Operation (hopefully) for 2010, if not for 2011, so that will make my work a lot easier and not review Spread Sheets and Acctg that Farm Mgmt Co provides.

[JON]

My audit

this year - resulted in less than $300 in additional income taxes and the agent recorded it as a no change audit. This is the first time I have ever had it, but the audit included some changes on the dividend schedule because he had opened an E*Trade account that had a like $700 of dividends. They reviewed a few items on the Schedules A, C and E with no change. This was an office audit I believe the net change was about $270. She said if under $300 we report it as a no change audit. This audit was conducted by the small business section of the IRS. It is too bad the CP-2000 could not be handled the same way.