Instructions For Schedule F - Profit Or Loss From Farming

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Form 8903 to take a deduction for in-

separate Schedule SE to pay self-employ-

an expenditure creates an asset having a

come from domestic production activities.

ment tax, as applicable.

useful life that extends substantially be-

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yond the close of the year, it may not be

Form 8910 to claim a credit for plac-

As long as you remain qualified, your

deductible or may be deductible only in

ing a new alternative motor vehicle in serv-

election cannot be revoked without IRS

part for the year of the payment. See chap-

ice for business use.

consent.

ter 2 of Pub. 225.

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Form 8911 to claim a credit for plac-

For more information, see Excep-

ing qualified alternative fuel vehicle refuel-

If you use an accrual method, check box

tion — Qualified Joint Venture on page C-2

ing property in service for business use.

2, “Accrual.” Complete Schedule F, Parts

of the instructions for Schedule C.

II, III, and Part I, line 11. Generally, report

If you use

Heavy highway vehicle use tax.

Exception —Community Income

income in the year in which you earned it

certain highway trucks, truck-trailers, trac-

and deduct expenses in the year you in-

If you and your spouse wholly own an un-

tor trailers, or buses in your farming busi-

curred them, even if you did not pay them

incorporated farming business as commu-

ness, you may have to pay a federal

in that year. Accrual basis taxpayers are put

nity property under the community

highway motor vehicle use tax. See the In-

on a cash basis for deducting business ex-

property laws of a state, foreign country, or

structions for Form 2290 to find out if you

penses owed to a related cash-basis tax-

U.S. possession, the income and deductions

owe this tax.

payer. Other rules determine the timing of

are reported based on the following.

Information returns.

You may have to file

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deductions based on economic perform-

If only one spouse participates in the

information returns for wages paid to em-

ance. See Pub. 538.

business, all of the income from that busi-

ployees, certain payments of fees and other

ness is the self-employment earnings of the

Farming syndicates.

Farming syndicates

nonemployee compensation, interest, rents,

spouse who carried on the business.

cannot use the cash method of accounting.

royalties, real estate transactions, annuities,

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If both spouses participate, the income

A farming syndicate may be a partnership,

and pensions. You may also have to file an

and deductions are allocated to the spouses

any other noncorporate group, or an S cor-

information return if you sold $5,000 or

based on their distributive shares.

poration if:

more of consumer products to a person on a

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If either or both you and your spouse

buy-sell, deposit-commission, or other sim-

The interests in the business have at

ilar basis for resale. For details, see the

are partners in a partnership, see Pub. 541.

any time been offered for sale in a way that

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2008 General Instructions for Forms 1099,

would require registration with any federal

If you and your spouse elected to treat

1098, 5498, and W-2G.

or state agency, or

the business as qualifying joint venture, see

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Exception — Qualified Joint Venture on

More than 35% of the loss during any

If you received cash of more than

this page.

tax year is shared by limited partners or

$10,000 in one or more related transactions

limited entrepreneurs. A limited partner is

in your farming business, you may have to

The only states with community prop-

one who can lose only the amount invested

file Form 8300. For details, see Pub. 1544.

erty laws are Arizona, California, Idaho,

or required to be invested in the partner-

Louisiana, Nevada, New Mexico, Texas,

Reportable transaction disclosure state-

ship. A limited entrepreneur is a person

Washington, and Wisconsin. A change in

ment.

If you entered into a reportable

who does not take any active part in manag-

your reporting position will be treated as a

transaction in 2008, you must file Form

ing the business.

conversion of the entity.

8886 to disclose information if your federal

income tax liability is affected by your par-

Estimated Tax

ticipation in the transaction. You may have

Line D

If you had to make estimated tax payments

to pay a penalty if you are required to file

for 2008 and you underpaid your estimated

Form 8886 but do not do so. You may also

You need an employer identification num-

tax, you will not be charged a penalty if

have to pay interest and penalties on any

ber (EIN) only if you had a qualified retire-

both of the following apply.

reportable transaction understatements. For

ment plan or were required to file an

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more information on reportable transac-

Your gross farming or fishing income

employment, excise, estate, trust, partner-

tions, see Reportable Transaction Disclo-

for 2007 or 2008 is at least two-thirds of

ship, or alcohol, tobacco, and firearms tax

sure Statement on page C-2 of the

your gross income.

return. If you need an EIN, see the Instruc-

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instructions for Schedule C.

You file your 2008 tax return and pay

tions for Form SS-4. If you do not have an

the tax due by March 2, 2009.

EIN, leave line D blank.

Husband-Wife Farm

For details, see chapter 15 of Pub. 225.

If you and your spouse jointly own and

operate a farm as an unincorporated busi-

Line E

ness and share in the profits and losses, you

Specific Instructions

are partners in a partnership whether or not

Material participation.

For the definition

you have a formal partnership agreement.

of material participation for purposes of the

File Form 1065 instead of Schedule F.

passive activity rules, see the instructions

Filers of Forms 1041, 1065, and 1065-B.

for Schedule C, line G, on page C-3. If you

Do not complete the block labeled “Social

Exception — Qualified Joint

security number (SSN).” Instead, enter

meet any of the material participation tests

Venture

described in those instructions, check the

your employer identification number (EIN)

If you and your spouse each materially par-

on line D.

“Yes” box.

ticipate as the only members of a jointly

owned and operated farm, and you file a

If you are a retired or disabled farmer,

you are treated as materially participating

joint return for the tax year, you can make a

Line B

joint election to be treated as a qualified

in a farming business if you materially par-

ticipated 5 or more of the 8 years preceding

joint venture instead of a partnership. For

On line B, enter one of the 14 principal

an explanation of “material participation,”

your retirement or disability. Also, a sur-

agricultural activity codes listed in Part IV

viving spouse is treated as materially par-

see the instructions for Schedule C, line G,

on page 2 of Schedule F. Select the code

ticipating in a farming activity if he or she

on page C-3, and the instructions for line E

that best describes the source of most of

on this page.

actively manages the farm and the real

your income.

property used for farming meets the estate

Making the election.

To make this elec-

tax rules for special valuation of farm prop-

tion, you must divide all items of income,

erty passed from a qualifying decedent.

gain, loss, deduction, and credit attributable

Line C

to the business between you and your

Check the “No” box if you did not mate-

spouse in accordance with your respective

If you use the cash method, check box 1,

rially participate. If you checked “No” and

interests in the venture. Each of you must

“Cash.” Complete Schedule F, Parts I and

you have a loss from this business, see

Limit on passive losses below. If you have

file a separate Schedule F. On each line of

II. Generally, report income in the year in

your separate Schedule F, you must enter

which you actually or constructively re-

a profit from this business activity but have

your share of the applicable income, deduc-

ceived it and deduct expenses in the year

current year losses from other passive ac-

tion, or loss. Each of you must also file a

you paid them. However, if the payment of

tivities or prior year unallowed passive ac-

F-2

Instructions For Schedule F - Profit Or Loss From Farming - 2008 Page 2

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