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Cash Rents VS Crop-Share and Sec 199A deduction and SE Tax

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    Cash Rents VS Crop-Share and Sec 199A deduction and SE Tax

    If farmer/landlord (who does not materially participate in the farm operation) has cash rent arrangement with tenant, it would appear that the activity does not rise to the level of a trade or business for purposes of Sec 199A deduction and the income would be reported on Sch E and not be subject to SE tax. Correct?

    If the arrangement is crop-share where the landlord does materially participate it would appear that the activity does rise to the level of a trade or business for purposes of Sec 199A deduction and the income would be reported on Sch F subject to SE tax. Correct?

    Is there an arrangement whereby the landlord could get the Sec 199A deduction but not have the income subject to SE tax? In other words, the activity and arrangement would qualify as a trade or business for purposes of 199A, but not rise to the level of material participation for purposes of SE tax?

    #2
    Unfortunately, there is no clear-cut answer with QBI. I have no experience with farming, but my thoughts to your three questions are "Probably", "Probably" and "Maybe, but I suspect probably not".


    For the third one, if the farm was rented out and the landlord had no activities for the actual farming, that should avoid SE tax.

    Similar to renting out a home, if the activities of the landlord (not the actual farming) are continuous and regular enough to rise to the level of a Trade or Business, it could qualify for QBI. However, renting out land likely requires little to no activity, so that is why I said "probably not".

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