A tax client was in a nursing home memory section for the last three years. Passed away mid 2022. He was a farmer but once he was confined to the nursing home his brother who also farms took over running his farm and planted harvested and everything else for his ill brother. The brother in the nursing home was completely passive in the operation but all expenses and income were in the ill brothers name. Is there anyway way to escape paying the self employment tax on this farm income?
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"If you are a retired or disabled farmer, you are treated as materially participating in a farming business if you materially participated 5 or more of the 8 years preceding your retirement or disability. Also, a surviving spouse is treated as materially participating in a farming activity if the surviving spouse actively manages the farm and the real property used for farming meets the estate tax rules for special valuation of farm property passed from a qualifying decedent."
https://www.irs.gov/instructions/i1040sf
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As far as I know, a sole proprietor is still subject to SE tax even if they have passive participation.Comment
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Self-employment is defined in a completely different section of the tax code (1402) from passive participation. It's a frequent point of confusion to think one is dependent on the other."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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