Client is a partnership that owns and operates a farm. Traditionally, the farm activities have been reported on Sch F as part of the Form 1065. The year 2014 was different in that the partnership leased out a portion of the farm to another farmer for cash rent. The question is how the cash rent should be reported on the 1065. The cash rent should not be added to the Sch F as it would not be subject to SE. Would Form 8825 come into effect here? If not, how would the cash rent be reported? Thanks.
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Form 8825 will be used to report the cash rent. Take care to allocate appropriate expenses to the Schedule E (depreciable improvements, property taxes, chemicals and fertilizer, repairs, etc. they may not have paid some of these since it was not a crop share rental) If Section 179 was taken in the past on any of the improvements, there could be potential recapture (review this issue carefully).
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