Form Pa-40 F - Pa Schedule F - Farm Income And Expenses
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4PA-40 F (09–09)
Forward to PA Schedule F
PA Schedule F
PA DEPARTMENT OF REVENUE
Farm Income and Expenses
Overview
Schedule SE. Do not report self-employment taxes to Pennsylvania.
Use PA Schedule F to report income or loss from a business you operate
Form 4684. Report gain or loss from all business activity on PA
as a farm. The following definitions may be helpful in determining if you
Schedule F. Include a casualty or theft loss (or gain, if insurance
should file a PA Schedule C or PA Schedule F:
proceeds exceed the basis of the property lost or taken) of business
Farming—The following activities, when engaged in as a regular busi-
property on Line 11 of PA Schedule F. Reference the federal schedule as
ness:
the explanation for the gain or loss item, but do not submit the federal
schedule with your PA tax return.
(i) Agriculture. The business of producing food products or other useful
or valuable growths or crops by tilling and cultivating the soil, and by
Form 4835. Report rental income from farm production or crop shares
breeding, raising and feeding cattle, livestock, bees, poultry or other ani-
whether or not you materially participate in the production of that
mals that produce a food product or are themselves a food product. For
income as rental income on PA Schedule E. Pennsylvania does not have
example, the commercial raising of mushrooms is farming, but garden-
"materially participating" rules. An owner may deduct all losses in the
ing and similar noncommercial activities are not farming. The following
taxable year realized. Only report on PA Schedule F the income,
are not included within the definition of agriculture:
expenses and profit or loss from the operation of your farm enterprise.
(A) The breeding or raising of dogs, cats and other pets; or game
Form 8824. Do not report like-kind exchanges on PA Schedule F.
animals, birds, fish or other animals intended for use in sport-
Pennsylvania laws and regulations do not recognize like-kind exchanges.
ing or recreational activities such as, but not limited to, hunt-
Report any gain or loss from any sale, exchange or disposition on Line
ing, fishing, show competition and racing.
11 of PA Schedule F, if the transaction was a normal business transac-
(B) The operation of stockyards or slaughterhouses.
tion. Report any gain or loss from other dispositions (nonbusiness) on PA
Schedule D.
(ii) Horticulture. The business of producing vegetables, vegetable plants,
fruits and nursery stock, including the operation of commercial vegetable
If you own or operate more than one farm or farming operation, you
greenhouses and nurseries. Horticulture does not include the business of
must submit a separate PA Schedule F for each operation.
servicing plants owned by other persons.
Other Pennsylvania and federal income tax differences.
(iii) Floriculture. The business of producing flowers and decorative or
PA income from farming generally differs from the income determined
shade trees, plants and shrubs in the field, nursery or greenhouse. The
for federal income tax purposes. Further, Pennsylvania will no longer
raising of trees as timber or lumbering and logging or sawmill operations
accept a PA Schedule C-F Reconciliation for the purpose of adjusting the
are not included in the definition of floriculture.
federal farm income to PA farm income. Therefore, the items which were
(iv) Dairy farming. The business of breeding, feeding and raising cattle
previously included as additions to PA income or expenses on the PA
and other milk producing animals, and the production of feed for them
Schedule C-F Reconciliation should be included with the specific line of
by the owner of the animals. This doesn’t include operations such as pas-
income or expense on PA Schedule F. In addition, those items which
teurizing or homogenizing or the making of butter, cheese and ice cream.
Pennsylvania does not require be reported as income or does not allow
These activities should be reported on PA Schedule C.
as expense in determining net farm income, which are allowed in the
determination of net federal farm income, should not be included in the
(v) Fur-ranching. The propagation and raising of ranch raised fur-bear-
specific farm income or expenses on PA Schedule F.
ing animals.
Examples of items that Pennsylvania requires as additions to income
(vi) Propagation of game birds. The propagation of game birds for
include: any advance receipts for goods or services; working capital
commercial purposes by holders of propagation permits issued under 34
interest or dividend income including federal-exempt interest and
Pa.C.S. § § 101—2965 of the Game and Wildlife Code.
dividend income from obligations of other states; gains from the sale of
(vii) Propagation of aquatic animals. The propagation of fish and other
business assets where the property is replaced by similar property; gains
aquatic animals for commercial use as a food or food product by holders
from involuntary conversions (such as those from IRC Section 1033);
of propagation permits issued under 30 Pa.C.S. § § 101—7314 of the
and gains from the sale of property where PA basis is different than
Fish and Boat Code.
federal basis.
For more information regarding the definition of a business, profession
Examples of items that Pennsylvania allows as additions to expenses that
or farm activity and for Pennsylvania’s requirements for reporting income
required a reduction for federal tax purposes include: a meals, travel and
and expenses, visit
entertainment expense deduction of 100 percent by Pennsylvania for the
expenses incurred; any differences in depreciation related to differences
NOTE: Pennsylvania determines income and loss under those
in basis of assets, amount of allowable Section 179 expense, or method
accounting principles, systems and practices acceptable by standards of
of depreciation for federal or PA purposes; and any other reductions in
the accounting profession and consistent with the regulations of the
federal expenses allowed at 100 percent for PA personal income tax
Department.
purposes.
Pennsylvania does not generally follow federal tax accounting rules to
determine income or loss. You may use any accounting method for PA
Examples of items that Pennsylvania requires as reductions in federal
purposes, as long as you apply accounting methods consistently.
income or expenses include: income taxes based upon gross or net
income; any differences in depreciation related to differences in basis of
Pennsylvania does not allow Farm Income Averaging.
assets, amount of allowable Section 179 expense, or method of
A farmer may deduct all losses in the taxable year realized. Report all
depreciation for federal or PA purposes; recognition of cancellation of
transactions directly related to your farming operation on PA Schedule F.
debt income; recognition of income from IRC Section 481(a) spread
You should maintain separate books and records for PA Personal Income
adjustments; payments for owner pension, profit-sharing plans,
Tax (PIT) purposes. You may usually use your Federal Schedule F
deferred, or welfare benefit plans; percentage depletion; direct
expenses for PA PIT purposes. However, you may not use federal
expensing of organizational expenses, start-up costs; or syndication
amounts if you made certain elections to accelerate or defer income
fees; losses from the sale of property where PA basis is different than
and expenses or spread expenses over more than one taxable year. To
federal basis; and any other income or expenses where there is a
take advantage of the Pennsylvania reporting differences that decrease
specialized federal treatment that is not specifically addressed or allowed
your federal profit, complete PA Schedule F.
by PA personal income tax law that might involve additional expensing,
The Federal Schedule F instructions for the following federal schedules
expensing verses capitalization, carry back or carry forward of losses,
do not apply:
income recognition, or other special treatments.
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