Instructions For Schedule F - Profit Or Loss From Farming

ticipation in the transaction. You may have

Estimated Tax

who does not take any active part in manag-

to pay a penalty if you are required to file

ing the business.

If you had to make estimated tax payments

Form 8886 but do not do so. You may also

for 2009 and you underpaid your estimated

have to pay interest and penalties on any

tax, you will not be charged a penalty if

reportable transaction understatements. For

Line D

both of the following apply.

more information on reportable transac-

•

tions, see Reportable Transaction Disclo-

Enter on line D the employer identification

Your gross farming or fishing income

sure Statement on page C-2 of the

number (EIN) that was issued to you. Do

for 2008 or 2009 is at least two-thirds of

instructions for Schedule C.

your gross income.

not enter your SSN. Do not enter another

•

taxpayer’s EIN (for example, from any

You file your 2009 tax return and pay

Husband-Wife Farm

Forms 1099-MISC that you received). If

the tax due by March 1, 2010.

you do not have an EIN, leave line D

If you and your spouse jointly own and

blank.

For details, see chapter 15 of Pub. 225.

operate a farm as an unincorporated busi-

ness and share in the profits and losses, you

You need an EIN only if you have a

are partners in a partnership whether or not

qualified retirement plan or are required to

you have a formal partnership agreement.

Specific Instructions

file employment, excise, alcohol, tobacco,

File Form 1065 instead of Schedule F.

or firearms returns, or are a payer of gam-

bling winnings. If you need an EIN, see the

Exception — Qualified Joint

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

Instructions for Form SS-4.

Venture

Do not complete the block labeled “Social

security number (SSN).” Instead, enter the

If you and your spouse each materially par-

Single-member LLCs.

If you are the sole

employer identification number (EIN) is-

ticipate as the only members of a jointly

owner of an LLC that is not treated as a

sued to the estate, trust, or partnership on

owned and operated farm, and you file a

separate entity for federal income tax pur-

line D.

joint return for the tax year, you can make a

poses, you may have an EIN that was is-

joint election to be treated as a qualified

sued to the LLC (and in the LLC’s legal

joint venture instead of a partnership. For

name) if you are required to file employ-

an explanation of “material participation,”

Line B

ment tax returns and certain excise tax re-

see the instructions for Schedule C, line G,

turns. However, you should enter on line

On line B, enter one of the 14 principal

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

D only the EIN issued to you and in your

agricultural activity codes listed in Part IV

on this page.

name as the sole proprietor of your

on page 2 of Schedule F. Select the code

farming business. If you do not have such

To make this elec-

Making the election.

that best describes the source of most of

an EIN, leave line D blank. Do not enter on

tion, you must divide all items of income,

your income.

line D the EIN issued to the LLC.

gain, loss, deduction, and credit attributable

to the farming business between you and

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

your spouse in accordance with your re-

Enter on line D the EIN issued to the estate,

Line C

spective interests in the venture. Each of

trust, or partnership.

you must file a separate Schedule F. On

If you use the cash method, check box 1,

each line of your separate Schedule F, you

“Cash.” Complete Schedule F, Parts I and

must enter your share of the applicable in-

II. Generally, report income in the year in

Line E

come, deduction, or loss. Each of you must

which you actually or constructively re-

also file a separate Schedule SE to pay

ceived it and deduct expenses in the year

Material participation.

For the definition

self-employment tax, as applicable.

you paid them. However, if the payment of

of material participation for purposes of the

an expenditure creates an asset having a

passive activity rules, see the instructions

As long as you remain qualified, your

useful life that extends substantially be-

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

election cannot be revoked without IRS

yond the close of the year, it may not be

meet any of the material participation tests

consent.

deductible or may be deductible only in

described in those instructions, check the

For more information, see Excep-

part for the year of the payment. See chap-

“Yes” box.

tion — Qualified Joint Venture on page C-2

ter 2 of Pub. 225.

of the instructions for Schedule C.

If you are a retired or disabled farmer,

If you use an accrual method, check box

you are treated as materially participating

Exception — Community Income

2, “Accrual.” Complete Schedule F, Parts

in a farming business if you materially par-

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

ticipated 5 or more of the 8 years preceding

If you and your spouse wholly own an un-

income in the year in which you earned it

your retirement or disability. Also, a sur-

incorporated farming business as commu-

and deduct expenses in the year you in-

viving spouse is treated as materially par-

nity property under the community

curred them, even if you did not pay them

ticipating in a farming activity if he or she

property laws of a state, foreign country, or

in that year. Accrual basis taxpayers are put

actively manages the farm and the real

U.S. possession, the income and deductions

on a cash basis for deducting business ex-

property used for farming meets the estate

are reported as follows.

•

tax rules for special valuation of farm prop-

penses owed to a related cash-basis tax-

If only one spouse participates in the

payer. Other rules determine the timing of

erty passed from a qualifying decedent.

business, all of the income from that busi-

deductions based on economic perform-

ness is the self-employment earnings of the

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

ance. See Pub. 538.

spouse who carried on the business.

rially participate. If you checked “No” and

•

If both spouses participate, the income

you have a loss from this business, see

Farming syndicates.

Farming syndicates

and deductions are allocated to the spouses

Limit on passive losses below. If you have

cannot use the cash method of accounting.

based on their distributive shares.

a profit from this business activity but have

A farming syndicate may be a partnership,

•

current year losses from other passive ac-

If either or both you and your spouse

any other noncorporate group, or an S cor-

tivities or prior year unallowed passive ac-

are partners in a partnership, see Pub. 541.

poration if:

•

tivity losses, see the Instructions for Form

•

If you and your spouse elected to treat

The interests in the business have at

8582.

the business as qualifying joint venture, see

any time been offered for sale in a way that

Exception — Qualified Joint Venture on

would require registration with any federal

Limit on passive losses.

If you checked the

this page.

or state agency, or

“No” box and you have a loss from this

•

More than 35% of the loss during any

The only states with community prop-

business, you may have to use Form 8582

tax year is shared by limited partners or

erty laws are Arizona, California, Idaho,

to figure your allowable loss, if any, to

limited entrepreneurs. A limited partner is

Louisiana, Nevada, New Mexico, Texas,

enter on Schedule F, line 36. Generally,

one who can lose only the amount invested

Washington, and Wisconsin. A change in

you can deduct losses from passive activi-

or required to be invested in the partner-

your reporting position will be treated as a

ties only to the extent of income from pas-

ship. A limited entrepreneur is a person

conversion of the entity.

sive activities. For details, see Pub. 925.

F-2

Instructions For Schedule F - Profit Or Loss From Farming - 2009 Page 2

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