Instructions For Schedule F - Profit Or Loss From Farming Form 2006 (Page 2 of 7) in pdf

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If you ran the farm yourself and re-

Your gross farming or fishing income

Line D

ceived rents based on crop shares or farm

for 2005 or 2006 is at least two-thirds of

production, report these rents as income on

your gross income.

You need an employer identification num-

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line 4.

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

You file your 2006 tax return and pay

ment plan or were required to file an

the tax due by March 1, 2007.

S a l e s

o f

l i v e s t o c k

b e c a u s e

o f

employment, excise, estate, trust, partner-

weather-related conditions.

If you sold

For details, see Pub. 225.

ship, or alcohol, tobacco, and firearms tax

livestock because of drought, flood, or

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

other weather-related conditions, you can

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

elect to report the income from the sale in

EIN, leave line D blank.

Specific Instructions

the year after the year of sale if all of the

following apply.

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Your main business is farming.

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

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Line E

You can show that you sold the live-

Do not complete the block labeled “Social

stock only because of weather-related con-

security number (SSN).” Instead, enter

For the definition

Material participation.

ditions.

your employer identification number (EIN)

of material participation for purposes of the

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on line D.

Your area qualified for federal aid.

passive activity rules, see the instructions

for Schedule C, line G, that begin on page

See Pub. 225 for details.

C-2. If you meet any of the material partici-

If you were a

pation tests described in those instructions,

Chapter 11 bankruptcy.

Line B

debtor in a chapter 11 bankruptcy case dur-

check the “Yes” box.

On line B, enter one of the 14 principal

ing 2006, see page 22 in the instructions for

agricultural activity codes listed in Part IV

If you are a retired or disabled farmer,

Form 1040 and page SE-2 of the instruc-

on page 2 of Schedule F. Select the code

you are treated as materially participating

tions for Schedule SE (Form 1040).

that best describes the source of most of

in a farming business if you materially par-

If you re-

Forms 1099 or CCC-1099-G.

your income.

ticipated 5 of the 8 years preceding your

ceived Forms 1099 or CCC-1099-G show-

retirement or disability. Also, a surviving

ing amounts paid to you, first determine if

spouse is treated as materially participating

the amounts are to be included with farm

in a farming activity if he or she actively

Line C

income. Then, use the following chart to

manages the farm and the real property

determine where to report the income on

If you use the cash method, check box 1,

used for farming meets the estate tax rules

Schedule F. Include the Form 1099 or

labeled “Cash.” Complete Schedule F,

for special valuation of farm property

CCC-1099-G amounts in the total amount

Parts I and II. Generally, report income in

passed from a qualifying decedent.

reported on that line.

the year in which you actually or construc-

tively received it and deduct expenses in

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

Where to

the year you paid them. However, if the

rially participate. If you checked “No” and

Form

report

payment of an expenditure creates an asset

you have a loss from this business, see

having a useful life that extends substan-

Limit on passive losses below. If you have

1099-PATR . . . . . . . . . . . .

Line 5a

tially beyond the close of the year, it may

a profit from this business activity but have

1099-A . . . . . . . . . . . . . . . .

Line 7b

not be deductible or may be deductible only

current year losses from other passive ac-

1099-MISC for crop

tivities or prior year unallowed passive ac-

in part for the year of the payment. See Pub.

insurance . . . . . . . . . . . . . .

Line 8a

tivity losses, see the Instructions for Form

225.

1099-G or CCC-1099-G

8582.

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for disaster payments . .

Line 8a

If you use an accrual method, check box

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2, labeled “Accrual.” Complete Schedule

for other agricultural

Limit on passive losses.

If you checked the

F, Parts II, III, and Part I, line 11. Gener-

program payments . . . .

Line 6a

“No” box and you have a loss from this

ally, report income in the year in which you

business, you may have to use Form 8582

earned it and deduct expenses in the year

to figure your allowable loss, if any, to

You may also receive Form 1099-MISC

you incurred them, even if you did not pay

enter on Schedule F, line 36. Generally,

for other types of income. In this case, re-

them in that year. Accrual basis taxpayers

you can deduct losses from passive activi-

port it on whichever line best describes the

are put on a cash basis for deducting busi-

ties only to the extent of income from pas-

income. For example, if you received a

ness expenses owed to a related cash-basis

sive activities. For details, see Pub. 925.

Form 1099-MISC for custom farming

taxpayer. Other rules determine the timing

work, include this amount on line 9, “Cus-

of deductions based on economic perform-

tom hire (machine work) income.”

ance. See Pub. 538.

Part I. Farm Income—

Farming syndicates cannot use the cash

method of accounting. A farming syndicate

Lines 5a and 5b

Cash Method

may be a partnership, any other

noncorporate group, or an S corporation if:

If you received distributions from a cooper-

In Part I, show income received for items

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ative in 2006, you should receive Form

The interests in the business have ever

listed on lines 1 through 10. Generally, in-

1099-PATR. On line 5a, show your total

been for sale in a way that would require

clude both the cash actually or construc-

distributions from cooperatives. This in-

registration with any federal or state

tively received and the fair market value of

cludes patronage dividends, nonpatronage

agency, or

goods or other property received for these

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distributions, per-unit retain allocations,

items. Income is constructively received

More than 35% of the loss during any

and redemption of nonqualified notices and

when it is credited to your account or set

tax year is shared by limited partners or

per-unit retain allocations.

limited entrepreneurs. A limited partner is

aside for you to use. However, direct pay-

one who can lose only the amount invested

ments or counter-cyclical payments re-

Show patronage dividends received in

or required to be invested in the partner-

ceived under the Farm Security and Rural

cash and the dollar amount of qualified

ship. A limited entrepreneur is a person

Investment Act of 2002 are required to be

written notices of allocation. If you re-

who does not take any active part in manag-

included in income only in the year of ac-

ceived property as patronage dividends, re-

ing the business.

tual receipt.

port the fair market value of the property as

F-2

Instructions For Schedule F - Profit Or Loss From Farming Form 2006 Page 2

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