Instructions For Schedule F - Profit Or Loss From Farming Form 2006 (Page 5 of 7) in pdf

land, livestock you bought or raised for re-

costs to the cost of the livestock, and deduct

Line 24

sale, or other property in your inventory.

them when the livestock is sold.

Enter the amounts you paid for farm labor.

You can also elect under section 179 to

Do not include amounts paid to yourself.

expense a portion of the cost of certain

Reduce your deduction by the amounts

Line 22

property you bought in 2006 for use in your

claimed on:

farming business. The section 179 election

•

Deduct on this line premiums paid for farm

is made on Form 4562.

Form 5884, Work Opportunity Credit,

business insurance. Deduct on line 17

line 2;

For information about depreciation and

amounts paid for employee accident and

•

Form 5884-A, Credits for Employers

the section 179 deduction, see Pub. 946.

health insurance. Amounts credited to a re-

Affected by Hurricane Katrina, Rita, or

serve for self-insurance or premiums paid

For details on the increased depreciation

Wilma, line 6;

for a policy that pays for your lost earnings

•

and section 179 deductions for qualified

Form 8844, Empowerment Zone and

due to sickness or disability are not deduct-

property in the GO Zone, see Pub. 225.

Renewal Community Employment Credit,

ible.

line 2; and

See the Instructions for Form 4562 for

•

information on when you must complete

Form 8861, Welfare-to-Work Credit,

and attach Form 4562.

line 2.

Lines 23a and 23b

Include the cost of boarding farm labor

Interest allocation rules.

The tax treatment

but not the value of any products they used

Line 17

of interest expense differs depending on its

from the farm. Include only what you paid

type. For example, home mortgage interest

household help to care for farm laborers.

Deduct contributions to employee benefit

and investment interest are treated differ-

programs that are not an incidental part of a

ently. “Interest allocation” rules require

If you provided taxable fringe

pension or profit-sharing plan included on

you to allocate (classify) your interest ex-

benefits to your employees,

line 25. Examples are accident and health

pense so it is deducted on the correct line of

such as personal use of a car, do

plans, group-term life insurance, and de-

your return and receives the right tax treat-

not include in farm labor the

pendent care assistance programs. If you

ment. These rules could affect how much

amounts you depreciated or deducted else-

made contributions on your behalf as a

interest you are allowed to deduct on

where.

self-employed person to a dependent care

Schedule F.

assistance program, complete Form 2441,

Parts I and III, to figure your deductible

Generally, you allocate interest expense

Line 25

contributions to that program.

by tracing how the proceeds of the loan are

used. See Pub. 535 for details.

Contributions you made on your behalf

Enter your deduction for contributions to

as a self-employed person to an accident

employee pension, profit-sharing, or annu-

If you paid interest on a debt secured by

and health plan or for group-term life insur-

ity plans. If the plan included you as a

your main home and any of the proceeds

ance are not deductible on Schedule F.

self-employed person, enter contributions

from that debt were used in your farming

However, you may be able to deduct on

made as an employer on your behalf on

business, see Pub. 535 to figure the amount

Form 1040, line 29 (or on Form 1040NR,

Form 1040, line 28 (or on Form 1040NR,

to include on lines 23a and 23b.

line 28), the amount you paid for health

line 27), not on Schedule F.

insurance on behalf of yourself, your

Generally, you must file the applicable

spouse, and dependents even if you do not

How to report.

If you have a mortgage on

form listed below if you maintain a pen-

itemize your deductions. See the instruc-

real property used in your farming business

sion, profit-sharing, or other funded-de-

tions for Form 1040, line 29, for details.

(other than your main home), enter on line

ferred compensation plan. The filing

23a the interest you paid for 2006 to banks

requirement is not affected by whether or

or other financial institutions for which you

not the plan qualified under the Internal

received a Form 1098 (or similar state-

Line 18

Revenue Code, or whether or not you claim

ment). If you did not receive a Form 1098,

a deduction for the current tax year. There

If you use the cash method, you cannot

enter the interest on line 23b.

is a penalty for failure to timely file these

deduct when paid the cost of feed your

forms.

livestock will consume in a later year un-

If you paid more mortgage interest than

less all of the following apply.

is shown on Form 1098, see Pub. 535 to

•

File this form for a

Form 5500-EZ.

find out if you can deduct the additional

The payment was for the purchase of

one-participant plan. A one-participant

interest. If you can, include the amount on

feed rather than a deposit.

plan is a plan that only covers you (or you

•

line 23a. Attach a statement to your return

The prepayment had a business pur-

and your spouse).

explaining the difference and enter “See

pose and was not made merely to avoid tax.

•

attached” in the margin next to line 23a.

File this form for a plan that is

Form 5500.

Deducting the prepayment will not

not a one-participant plan.

materially distort your income.

If you and at least one other person

(other than your spouse if you file a joint

If all of the above apply, you can deduct

For details, see Pub. 560.

return) were liable for and paid interest on

the prepaid feed, which is subject to the

the mortgage and the other person received

overall limit for Prepaid farm supplies ex-

the Form 1098, include your share of the

plained on page F-4. If all of the above do

Lines 26a and 26b

interest on line 23b. Attach a statement to

not apply, you can deduct the prepaid feed

your return showing the name and address

only in the year it is consumed.

If you rented or leased vehicles, machinery,

of the person who received the Form 1098.

or equipment, enter on line 26a the business

In the margin next to line 23b, enter “See

portion of your rental cost. But if you

attached.”

leased a vehicle for a term of 30 days or

Line 20

more, you may have to reduce your deduc-

Do not deduct interest you prepaid in

Do not include the cost of transportation

tion by an inclusion amount. See Leasing a

2006 for later years; include only the part

incurred in purchasing livestock held for

Car in Pub. 463 to figure your inclusion

that applies to 2006.

resale as freight paid. Instead, add these

amount.

F-5

Instructions For Schedule F - Profit Or Loss From Farming Form 2006 Page 5

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