about whether farm conservation reserve payments are subject to self employment tax. It seems like rent, yet rent is for the use or occupancy of property. CRP payments are in exchange for diverting land from active farming practices. Any comments?
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Follow the Money
If this is in connection with a farm activity (Sch F) I would say it is reportable on Sch F and taxable under self-employment (if there is a profit).
If it is in connection with rent (Form 4835 or Sch E), I would say no.
The purpose of the payment appears to reward the farmer for "not working" but I don't think that means the resulting inactivity implies no self-employment tax. -
Read IRS Notice 2006-108 which has a rather comprehensive discussion of this issue. www.irs.gov/pub/irs-drop/n-06-108.pdf. Prior to Wuebker v. Commissioner it appears some prior rulings defined payments as rents depending on circumstances. If there is material participation, they are apparently deemed to be subject to SECA now.Last edited by Burke; 03-13-2012, 06:43 PM.Comment
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Note on Schedule SE that it states that if taxpayer received social security or disability income then CRP payments are not subject to SE taxes. Would seem to indicate that if not in receipt of one of these two items then CRP payments would be subject to SE taxes.Comment
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Wow. It sure does. That's amazing.Comment
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