Saturday, April 17, 2021

Is That Old Fence Really the Boundary?

Overview

For rural properties, fences are generally considered by the landowners to be the boundaries.  But by law, the actual boundary is an imaginary line that is located according to the property description in the deeds to the properties.  It’s this discrepancy between the existing fence and the legal boundary that can create issues between adjacent landowners.  How is this issue resolved?  What factors are relevant in determining where the actual boundary is located. 

I am revisiting a topic I have written about in the past because the questions continue to come up.  There may also be new readers to the blog that haven’t read my prior posts dealing with this topic.  So going over things again can’t hurt.

Old fences and boundaries – it’s the topic of today’s post.

Basic Principles

An existing fence is typically considered to be evidence of where the imaginary line between two properties is located.  It matters little whether the fence is permanent or not.  But, it is also possible (and in many instances, likely) that an old fence has been used as part of the description of the land as the property has changed hands.  It’s not unusual for a farm property to be sold according to the existing fence lines. 

Metes and bounds.   In the eastern one-third of the United States, land descriptions are likely to be “metes and bounds” descriptions.  With this type of description, a tract of land is described by a series of directions that trace the perimeter of the land.  Such tracing might include following an old fence. 

General location.  In some rural areas, I have seen deeds refer to the boundary of a farm by general location, such as “The old Snarkfeltcher place on Highway 47, three miles east of the Dinwiddie junction.”  With a description such as that, the boundary of the farm is the physical boundary where the land abuts an adjoining tract of land.  It might very well be marked by an existing fence, which the parties intend to use as the boundary.   

Note:   In either the situation where a metes and bounds description or a general location description is used, the fence may actually be considered to be the permanent boundary marker.  If the fence later deteriorates, it may be necessary to relocate (recreate) the fence to precisely determined the boundary. 

Survey.  Presently, it is common for a tract of land to be described in a way that requires the mapping out of survey lines.  This is common when the land is such that a survey is easy to conduct.  For some rural properties, however, the topography of the land may be such that there really isn’t a good way to do a survey at an economical price.  In this situation, an existing fence may not be built on the boundary line, but it is treated as the boundary by the adjoining landowners.  Indeed, it is often the case that prior adjoining owners agreed to build the fence to one side of the actual boundary line as a matter of convenience – to get around thick brush or trees or water or some other obstacle.  When this has happened, the fence was not intended to be the boundary line – at least not originally.  But, with the passage of time the fence may come to be thought of as marking the boundary regardless of whether it actually does. 

Existing Fence Line As Actual Boundary

Those fences that are not on the true boundary (perhaps as revealed by a subsequent survey), are what give rise to disputes.  If I were to track the questions that I get by category, I would say that, after tax and estate/business planning questions, issues with fences (and leases) trigger the most questions.  So, based on the above discussion, a key question is whether an old fence line can be substituted for the actual boundary when it is not on the surveyed line.  If it can, how does that happen?

Passage of Time

The mere passage of time will not cause the fence to be substituted for the property description boundary.  So, the fact that the fence has been there for decades doesn’t matter much by itself.  However, patterns of usage of the land on each side of the fence may cause the fence to become fixed as the boundary and have the legal effect of changing the boundary set out in the deed.  This is an important point surveyors and realtors often fail to properly understand.   

Adverse possession.  A party can acquire title to property that isn’t lawfully theirs by making an open and notorious use of the property for a specific period of time.  The timeframe varies from state-to-state as do the specific elements of an adverse possession claim, but in most states the timeframe is somewhere between five and 20 years.  But, for adverse possession to apply, the party trying to claim title via adverse possession must know that the property they are claiming as theirs doesn’t lawfully belong to them.  If it is not known where the actual property boundary is, courts look at the intent of the party trying to claim title by adverse possession.  If the property was occupied merely by mistake with no intent to claim the disputed area such that the claimant intended only to hold up to the true line (wherever it is), adverse possession is not present.  Alternatively, if the occupant takes possession of the property believing the land to be his or her own up to the mistaken line and openly claims title to it (often evidenced by conduct), the possession will be considered adverse. 

Note:   Many adverse possession claims fail because both parties have thought that the fence actually represented the boundary and thus do not intend to claim any additional property than what they are legally entitled to claim. 

Treating An Old Fence at the Boundary

Adjacent landowners may agree that an existing old fence actually constitutes the boundary in several ways.

Written agreement.  Although not common, the parties may settle uncertainty about the boundary on the basis of a written agreement.  In that instance, corrective deeds will be issued, and the property descriptions of the adjoining tracts will be changed to reflect the fence line.  Multiple deeds may be necessary to transfer the disputed area.  It’s important to hire an attorney that practices in real estate matters to get the deeds drafted and filed properly. 

Memo of understanding.  Another way in which the adjacent owners may settle the boundary dispute is to enter into a memorandum of understanding that designates the old fence line as the boundary.  That memo can be recorded in the land records where it will bind not only the present owners of the adjacent tracts, but their successors.  For the memorandum to be enforceable, the boundary must be uncertain or in dispute.  The memo is technically called a “parol agreement.”  It is not subject to state law governing conveyances.  Even so, it’s a good practice for the memo to accurately describe the affected land and that the parties sign it.  The parties should then observe the property line as described in the memo. 

Practical location.  Also, known as “boundary by acquiescence,” the doctrine of practical location may also be used to establish an old fence as the boundary.  This situation arises when one party occupies to the fence line for the statutory timeframe (the same timeframe as that for adverse possession), knowing that the fence is not the true boundary but not knowing where the true boundary is located.  If the parties know that the fence is not the true boundary, but they do know where the true boundary is located, neither a memorandum (parol agreement) nor boundary by acquiescence applies. 

Equitable exchange.  It may be possible in some states for a court to grant an “equitable exchange.”  With an equitable exchange, one party is ordered to “trade” property on one side of the line for property on the other.  However, this remedy is extraordinary, and a court will only grant such an exchange if the parties can show that the true location of the boundary will present an unusual hardship or some other circumstance.   

Recent Case

The farmland boundary cases are voluminous.  That’s unfortunate because it almost always means that neighbors are not getting along and are in a heated dispute about a boundary.  Resolving such a dispute in court can be costly.

An example of a boundary dispute that involved several of the concepts discussed in today’s article is the Iowa case of Liddiard v. Mikesh, 947 N.W.2d 231 (Iowa Ct. App. 2020).  In the case, the plaintiff failed to establish an existing fence as the boundary line either by adverse possession or under the boundary by acquiescence theory.  The facts revealed that the plaintiff and his family had owned their property for 75 years. The property description in the original deed noted that plaintiff’s property included forty acres, containing five acres “more or less” bounded by the brink of a bluff. The “more or less” language was not included when the plaintiff’s family purchased the land. The defendant hired a surveyor to complete a survey when he purchased property next to the plaintiff’s property. The survey was recorded and included a five-acre square cut-out in the northeast corner of the plaintiff’s property. In a dispute over logging timber, the defendant prevailed in small claims court, where the small claims court found that the defendant owned the five-acres. The small claims court noted it had no jurisdiction to establish property lines. Six years later, the plaintiff sought to quiet title for approximately eight acres, including the five-acre square. The plaintiff argued that the true boundary line was the fence line, and that he was the owner of the disputed property under theories of adverse possession and boundary by acquiescence.

The trial court held that the plaintiff failed to establish either possession by adverse possession or boundary by acquiescence. On appeal, the plaintiff argued that the trial court erred in ruling that he did not establish possession under either claim. The appellate court held that the plaintiff did not prove adverse possession by establishing hostile, actual, open, exclusive and continuous possession, under a claim of right for at least ten years. The appellate court noted that both parties had used the land, therefore the plaintiff’s use was not exclusive. While the plaintiff maintained the fence, the appellate court noted that a claim of right must be established by substantial maintenance and improvement to establish adverse possession. Additionally, the appellate court noted that the plaintiff did not openly claim ownership until the logging dispute six years prior. The appellate court also held that there was no boundary by acquiescence because both parties did not acknowledge and treat the fence line as the boundary. The appellate court noted that the defendant was able to show that the fence was a courtesy fence constructed to keep livestock contained. 

Conclusion

Fences and boundary matters can create headaches for rural landowners.  It’s best to know the rules so that you can get a dispute resolved quickly and efficiently, or not get into a dispute in the first place. 

April 17, 2021 in Real Property | Permalink | Comments (0)

Thursday, April 15, 2021

Regulation of Agriculture – Food Products, Slaughterhouse Line Speeds and CAFOs

Overview

Agriculture is one of the most heavily regulated industries in the United States.  Almost every activity of a farmer or rancher is somehow regulated by federal or state government.  For example, federal and state governments regulate the marketing and quality standards of various ag products; animal and plant health is regulated; farm programs are numerous and are often tied to crop insurance and/or soil conservation; water use is regulated; and ag products are subject to various export and import programs.  This just names a few ways that ag is regulated.  Such regulation can also lead a producer into tangled administrative battles with various regulatory agencies and which can end up in court.

In today’s post, I take a look at some recent examples of court cases involving the regulation of agriculture and food production.  It’s just a sample of what a farmer or rancher often encounters.

Recent cases involving the regulation of agriculture – it’s the topic of today’ post.

Background – The Government’s Regulatory Power Authority

Every level of government has certain basic powers. For example, the federal government's power includes the commerce power, exercise of eminent domain, the power to tax, and the power to spend.  The commerce power is the constitutionally-based power to regulate commerce between and among the states and with other countries and regulates goods and transactions “affecting” interstate commerce.  The power of eminent domain is the power to acquire property for the public good.  The power to tax is the power to generate revenue.  While the constitution limits the federal government's exercise of these powers, much of the regulation of agricultural activities occurs in accordance with the Congress' ability to regulate commerce among the states in accordance with the Commerce Clause of Article I, Section 8 of the Constitution.

State-level governmental power to regulate agricultural activities derives largely from the police power.  The states, in accordance with their police power, may regulate activities in order to promote the health, safety, and welfare of its citizens. The police power is limited only by the extent to which the regulations infringe upon constitutional guarantees, such as equal protection of the laws and by the limits on the “taking” of property value through the heavy hand of regulation.  In general, a state's exercise of its police power will only be found improper if it is utilized in an arbitrary, capricious, discriminatory or confiscatory manner or results in a “taking.”  But, of course, the power can be abused, as was evidenced clearly in some states during 2020. 

Thus, the extent and validity of much of federal regulation of agricultural activities is measured by the Commerce Clause while state regulation is made possible by the police power.

Recent Court Decisions

In recent weeks, the courts have decided numerous cases involving the regulation of food and agriculture concerning various matters.  The following is just a sampling of three cases:

Missouri Food Labeling Law Upheld

Turtle Islands Foods, SPC v. Thompson, No. 19-3154, 2021 U.S. App. LEXIS 9037 (8th Cir. Mar. 29, 2021)

 Missouri law (Mo. Rev. Stat. §265.494(7)) makes it a criminal offense to misrepresent a product as meat that is not derived from the harvested production of livestock or poultry. A violation of the law could result in up to a year in prison plus up to a $1,000 fine. The law is directed at businesses that sell “alternative” protein sources such as those that are plant-based or cell-cultured and market such products as a meat-based product. The plaintiff, a maker of a vegetarian turkey substitute, challenged the law as an unconstitutional violation of free speech, due process and the Dormant Commerce Clause. The plaintiff sought a preliminary injunction preventing the state from enforcing the law. The state submitted evidence showing how the plaintiff could comply with the law, noting that a label clearly stating that the product was “plant-based,” “veggie,” “lab grown,” or something similar.

The trial court denied the plaintiff’s request for an injunction on the basis that the law only barred a company from misleading consumers into believing that a product is meat from livestock when it is not. The trial court also determined that the plaintiff had failed to prove an irreparable injury by risk of prosecution because its packaging already contained the necessary disclaimers.

On further review, the appellate court affirmed. The appellate court noted that the plaintiff admitted that its products were labeled in such a way to clearly indicate that the products did not contain meat from slaughtered animals and denoted that they were plant-based, vegan or vegetarian. The appellate court noted that, on remand at the trial court, facts could be discovered that could possibly lead to a different result on appeal. 

USDA Rule Eliminating Line Speeds Vacated

United Food & Commercial Workers Union, Local No. 663 v. United States Department of Agriculture, No. 19-cv-2660, 2021 U.S. Dist. LEXIS 62656 (D. Minn. Mar. 31, 2021)

USDA inspectors, under the Federal Meat Inspection Act (FMIA), monitor port slaughter plants to ensure the safety and wholesomeness of pork products that are sold to the public. To ensure that post-mortem inspections are adequate, the Food Safety Inspection Service (FSIS) regulates the speed of evisceration lines. 9 C.F.R. §310.1(b)(3). In late 2019 the FSIS adopted as a final rule the New Swine Inspection System ("NSIS"), an optional program that implemented several reforms, including the elimination of evisceration line speed limits at pork processing plants. A labor union sued, claiming that the final rule was not properly promulgated under the Administrative Procedure Act (APA). When FSIS proposed the NSIS, it expressly identified worker safety as an important consideration and requested public comment on whether increasing line speeds would harm workers. The FSIS received many comments raising worker safety concerns before finalizing the optional rule. The court vacated the portion of the final rule pertaining to line speed limits concluding that the rule didn’t contain any discussion, analysis or evaluation of the submitted worker safety comments. The court reasoned that such failure violated the APA because worker safety was a key aspect of the rule. Thus, this part of the rule was remanded to the FSIS for review. The balance of the rule was not vacated and remains in effect. The court also stayed its order and entry of judgment for 90 days to give the FSIS time to address the issue. 

Zoning Ordinance Allows for CAFO

Chambers v. Delaware-Muncie Metropolitan Board of Zoning Appeals, 150 N.E.3d 603 (Ind. Ct. App. 2020)

The petitioners owned property located in an area that was zoned as “agricultural.” The petitioners sought and eventually obtained a permit from the county building commissioner to build several hog barns configured as a concentrated animal feeding operation (CAFO) on their property. Neighbors of the petitioners asked the zoning board to review the building commissioner’s decision to issue the permit. The zoning board voided the permit and determined that the farming zone did not recognize industrial agricultural uses, such as the petitioners’ proposed CAFO. The petitioners sought a review of the zoning board’s decision. The trial court noted that the zoning ordinance specifically permitted animal husbandry, as well as raising and selling hogs and the erection of barns and similar farming building. The trial court determined that the zoning ordinance clearly indicated that hog raising operations were a permitted use. The trial court noted that the county could have excluded CAFOs or put other restrictions in place to maintain more traditional farming operations. Additionally, the trial court noted that several CAFOs were located and permitted in other agricultural zones in the county. Thus, the trial court held that the zoning board’s decision was reversed and the building commissioner’s decision to issue the permit to the petitioners was reinstated. On appeal, the neighbors of the petitioners argued that the zoning ordinance was ambiguous because it did not mention CAFOs. The appellate court agreed with the trial court and noted that the zoning ordinance set no limit on the scale of permitted uses in the agricultural zone. The appellate court determined that the plain language of the zoning ordinance was not ambiguous, and the petitioners were permitted to raise any number of hogs, subject to state and federal limitations. 

Conclusion

The federal and state government regulation of agricultural activities seems to grow as the years go on.  The government becomes more and more entangled in the daily life of a farmer or rancher.  Do the benefits outweigh the costs?  Probably not?  Is there hope on the horizon for less governmental regulation?  That tide recently changed.  In any event the matter is just another reason that an experienced ag lawyer is needed more now than ever before.

April 15, 2021 in Regulatory Law | Permalink | Comments (0)

Monday, April 12, 2021

Tax Potpourri

Overview

Income tax (as well as other forms of taxes) has been an element of life for over a century in the United States.  Tax issues seemingly permeate just about everything a person does and shapes one’s behavior.  In today’s article I summarize several recent tax-related cases to illustrate my point of how pervasive tax issues are. 

Tax issues in various contexts in recent court cases – it’s the topic of today’s post.

Taxpayer Unable to Establish Funds Used to Cover Expenses as Loans or Gifts

Oss v. Dep’t. of Revenue, No. TC-MD 190304N, 2020 Ore. Tax LEXIS 47 (Ore. T.C. Jul. 30, 2020)

An issue that presents itself more than we would like to admit is the proper characterization of financial assistance provided to a child by a parent or parents.  The issue sometimes comes up when a parent dies without clear specification in a will or a trust of the nature of the transfer.  This often flares up when other children are present, and their inheritance would be diminished if the transfer were considered to be a gift.   

This matter came up in a recent Oregon case.  In the case, the plaintiff operated a recreational marijuana business as a single-member limited liability company. The plaintiff’s business and personal expenses were largely cash-based. Under the cash accounting method, the plaintiff reported on his 2015 Schedule C: gross receipts of $1,153,466; cost of goods sold of $1,100,217; and gross income of $53,249. After reviewing the plaintiff’s 2015 tax return and analyzing the plaintiff’s gross receipts using an indirect analysis, the defendant determined the plaintiff had $1,144,181 in purchases and had substantiated $287,414 in nondeductible expenses, resulting in $1,431,595 in outgoing cash. As a result, the defendant increased the plaintiff’s 2015 gross receipts by $278,129, which was the amount outgoing cash exceeded the plaintiff’s gross receipts.

The plaintiff argued that the additional funds used to cover expenses were attributable to a combination of loans, gifts, and savings. Specifically, the plaintiff claimed that he received $120,000 from his father as a result of four nontaxable loans and $150,000 in nontaxable gifts from his grandfather over six years. The plaintiff also claimed to have built up a reserve of cash savings by spending less on living expenses than the defendant had determined in its indirect income analysis.

The state tax court noted that taxpayers are required to keep adequate records in order to determine their correct tax liability. The court determined that the plaintiff was unable to establish that he received a loan from his father, gifts from inheritance funds, or cash savings. The plaintiff only had a handwritten note from his father and no bank statements or testimony to establish the loans or gifts existed. The court also noted that the plaintiff likely understated his annual living expenses by relying on bankruptcy standards to estimate living expenses. As a result, the court held that the defendant had properly adjusted the plaintiff’s gross receipts for 2015. 

Settlement Proceeds Are Taxable Income

Blum v. Comr., T.C. Memo. 2021-18

On this blog, I have published a couple of detailed articles on the tax treatment of court settlements and judgments.  You may read those here:https://lawprofessors.typepad.com/agriculturallaw/2019/07/tax-treatment-of-settlements-and-court-judgments.html and here https://lawprofessors.typepad.com/agriculturallaw/2020/12/taxation-of-settlements-and-court-judgments.html The issue came up again in a recent case involving a lawsuit against a law firm for malpractice. 

In the case, the petitioner was involved in a personal injury lawsuit and received a payment of $125,000 to settle a malpractice suit against her attorneys. She did not report the amount on her tax return for 2015 and the IRS determined a tax deficiency of $27,418, plus an accuracy-related penalty. The IRS later conceded the penalty, but maintained that the amount received was not on account of personal physical injuries or personal sickness under I.R.C. §104(a)(2). The Tax Court agreed with the IRS because the petitioner’s claims against the law firm did not involve any allegation that the firm’s conduct had caused her any physical injuries or sickness, but merely involved allegations that the firm had acted negligently in representing her against a hospital. 

IRS Listing of Taxpayers With Significant Tax Debt Constitutional

Rowen v. Comr., 156 T.C. No. 8 (2021)

Currently, a push is being made in D.C. for an “infrastructure” bill.  I guess the massive one in 2015 didn’t do the trick. The current proposal, just like the one in 2015, has a bunch of “stuff” in it that has little to nothing to do with infrastructure.  In the 2015 legislation, one of those non-infrastructure provisions was an IRS “travel ban.”  That “travel ban” provision came up in a recent case when a taxpayer claimed it was unconstitutional.

Section 32101, subsection (a) of the “Fixing America’s Surface Transportation” (FAST) Act created I.R.C. §7345 which authorizes the IRS to certify lists of seriously delinquent taxpayers to the Treasury Department that will then send those lists to the State Department for denial or revocation of a listed taxpayer’s passport.  In the recent case, the petitioner had unpaid tax debt of nearly $500,000 and the IRS certified to the Treasury Department that the petitioner had a “seriously delinquent tax debt” within the meaning of I.R.C. §7345(b), giving the U.S. Secretary of State the ability to deny or revoke the petitioner’s passport. The petitioner sued for a determination that the certification was erroneous under I.R.C. §7345(e)(1) and moved for summary judgment on the basis that I.RC. §7345 violated the Due Process Clause of the Constitution and illegally infringed his right to travel internationally. The petitioner also claimed that I.R.C. §7345 violated his human rights under the Universal Declaration of Human Rights.

The Tax Court held that I.R.C. §7345 is not constitutionally defective because it doesn’t restrict the right to international travel and that the IRS was entitled to judgment as a matter of law. The Tax Court noted that all passport-related decisions are left to the Secretary of State and that the authority of the Secretary of State to revoke a passport doesn’t derive from I.R.C. §7345. The Tax Court noted that the constitutionality of the authority granted to the Secretary of State by FAST Act section 32101(e) was not an issue in the case and, therefore, the Court expressed no view on that issue. 

Failure to Substantiate Eliminates Charitable Deduction

Chiarelli v. Comr., T.C. Memo. 2021-27

If there is one thing that is certain about tax law, it is that deductions are a matter of “legislative grace” and a taxpayer must be able to substantiate them if challenged.  Recently, the U.S. Tax Court dealt with yet another case involving the substantiation of deductions.

Under the facts of this case, the petitioner made numerous charitable donations of clothing, furniture and antiques that he inherited. However, the petitioner didn’t maintain any proper receipts from the charitable donees, he didn’t keep reliable records in lieu of receipts. The petitioner also didn’t have contemporaneous written acknowledgements for his contributions exceeding $250, and didn’t satisfy the heightened record keeping and return statement requirements for contribution exceeding $5,000. Appraisals of the donated items didn’t account for the items’ physical condition and age, and didn’t include any mention of the appraiser’s qualifications or a statement that the each appraisal was prepared for income tax purposes. The petitioner also did not complete the appraisal summary on Form 8283.

The Tax Court rejected the petitioner’s substantial compliance argument noting that while the petitioner provided supplemental information, the supplemental information was also incomplete. The Tax Court also rejected the petitioner’s claim that he cured his defective submissions by responding to IRS's request for additional documentation within 90 days in accord with Treas. Reg. §1.170A-13(c)(4). 

Conservation Easement Deduction Allowed for Donated Façade Easement

C.C.M. AM 2021-001 (Mar. 8, 2021)

Conservation easement deduction cases are everywhere.  The IRS is all over taxpayers engaged in donating permanent conservation easement to a qualified charity and claiming a charitable deduction for the loss of value to their land caused by the easement.  Recently the IRS put out more guidance on donated conservation easements in the form of a Memo from the IRS Chief Counsel’s Office.

The taxpayer in the Memo donated an easement on a building in a registered historic district on which the taxpayer had installed an accessibility ramp to comply with the Americans With Disabilities Act (ADA). The IRS determined that the installation of the ramp would not disqualify the taxpayer’s deduction. The IRS viewer the ramp as “upkeep” essential to the preservation of the structure. Such upkeep, if required to comply with the ADA, does not jeopardize the donor’s eligibility for a charitable deduction under I.R.C. §170(h)(4)(B) with respect to a building in a registered historic district. 

Conclusion

The manner in which taxation impacts daily life is staggering.  The cases discussed in today’s post illustrate just some of the ways that a taxpayer can get crosswise with the IRS.  Take heed!

April 12, 2021 in Income Tax | Permalink | Comments (0)

Saturday, April 10, 2021

Federal Farm Programs and the AGI Computation

Overview

Many farmers participate in federal farm programs and receive subsidies on a per-person basis.  There are limits to the amount of subsidies that can be received.  However, to be eligible to participate in most federal farm programs the applicant (individual or entity) must have an average adjusted gross income (AGI) of $900,000 or less. 

What is AGI for farm program eligibility purposes?  How is it computed?  Does it matter if the applicant is an individual or an entity? 

The computation of AGI for farm program eligibility purposes – it’s the topic of today’ post.

In General

A prerequisite to participating in many federal farm programs is annually certifying that average AGI doesn’t exceed a $900,000 threshold. The measuring period is the prior three years, skipping the immediately prior year.  The $900,000 limit applies to most USDA farm programs, but there are some exceptions – particularly those concerning conservation or disasters.  An applicant must provide the IRS with written consent to allow the USDA to verify AGI.  The consent (via USDA Form CCC-941) allows the IRS to verify to the FSA, based on a farm program applicant’s tax return information, whether (for most farm programs) the $900,000 limit is not exceeded.  The consent covers the three tax years that precede the immediately preceding tax year for which farm program benefits are being sought.  Thus, for 2021, the relevant tax years are 2019, 2018 and 2017.  For a farmer or a farming operation that has not been operating for the three-year period before the immediately preceding year, the FSA uses an average of income for the years of operation. FSA 5-PL, Para. 312, subparagraph F

Note:  Worksheets used in determining AGI calculations should be retained for at least three years.

Defining AGI – The FSA Way

As noted, average AGI is measured over the three taxable years preceding the most immediately preceding complete taxable year for which benefits are requested.  FSA 5-PL, Para. 293.  The FSA, in its 5-PL at Paragraph 296, subparagraph B, sets forth the following Table for guidance on AGI determinations using a producer/applicant’s data that has been reported to the IRS:

If determining AGI for….

Then see IRS Form….

AND use the amount entered on….

Corporations

1120 or 1120-S

Either of the following:

·       Line 30 (total taxable income) plus line 19 (charitable contributions)

·       For S corporations, use only Form 1120-S, line 21 (ordinary business income).

Estates or trusts

1041

Line 23 (taxable income) plus line 13 (charitable deductions)

LLCs, LLPs, LP or similar type organization taxed as partnership

1065

Line 22 (total income from trade or business) plus line 10 (guaranteed payments to partners).

Persons

1040

Line 8b (AGI)

Tax-exempt or charitable organizations

990-T

Line 31 (unrelated business taxable income) minus income that CCC determines to be from noncommercial activity.

For a sole proprietor filing a joint return, an exception exists from the need to report the full amount reported as AGI on the final IRS tax return for the applicable year.  Under the exception, a certification may be provided by a CPA or an attorney that specifies what the amounts would have been if separate tax returns would have been filed for the applicable year.  FSA 5-PL, Para. 296, subparagraph A. 

Schedule K Issues

IRS Form 1120-S and Form 1065 do not refer to income or deductions reported on Schedule K-1. A Schedule K-1 is the IRS Form that is used to report amounts that are passed through to each taxpayer that has an interest in a “flow-through” entity such as an S corporation, partnership, trust or an estate.  Consequently, any I.R.C. §179 deduction (i.e., expense method depreciation) would not be factored into the average AGI computation for a farming operation that is a flow-through entity seeking farm program benefits.  But it would be taken into account for a C corporation. Thus, a C corporation and an S corporation with identical taxable incomes may not be treated similarly for farm program eligibility purposes.  This is particularly true for an S corporation farming entity, for example, that has AGI over the $900,000 threshold without factoring in any I.R.C. §179 amount but is under the limitation when the I.R.C. §179 deduction is taken into account. 

Threatened with litigation on this disparate treatment, the FSA backed down and the 5-PL was later amended to reflect the rule change allowing the I.R.C. §179 deduction for flow-through entities as well as sole proprietorships and C corporations.  However, FSA still ignores other K-1 items in the computation of AGI for purposes of the $900,000 AGI computation.  At least this is the position of the national FSA.  There may be variations at the local and state level.  Consistent application of the regulations has never been a staple of the FSA. 

Certifying Income – Form CCC-941

A producer seeking farm program benefits, as noted above, must annually certify income to the FSA to ensure that the $900,000 threshold (in most instances) is not exceeded. The verification process starts with the FSA’s referral of the applicant’s AGI certification and written consent to the IRS to use the applicant’s tax information on file and disclose certain information to the FSA for AGI verification purposes.  FSA 5-PL, Para. 301, Subparagraph A.  Consent for disclosure of tax information is valid only if the IRS receives it within 120 calendar days of the date the Form CCC-941 was signed.  FSA 5-PL, Para. 301, Subparagraph E. 

If an attorney or CPA statement is provided, both the statement and the completed Form CCC-941 must be submitted to the local FSA office before the Form CCC-941 is considered to be complete and AGI is updated in the producer’s file.  The submitted Form CCC-941 is then sent to the IRS and the statement of the attorney/CPA is attached to a copy of the Form that FSA retains.  FSA 5-PL, Para. 302, Subparagraph A.

Form CCC-941 is required to determine payment eligibility for all persons; legal entities; interest holders in a legal entity, including embedded entities to the fourth level of ownership interest, regardless of the level of interest held; and, members of a general partnership or joint venture, regardless of the number of members.  FSA 5-PL, Par. 294.  It is submitted under the same name and TIN as is used for tax filing purposes.  For example, for farm assets and land that have been transferred to a revocable trust, the identification on Form CCC-941 is the grantor’s name and Social Security number.

If Form CCC-941 is not filed for a program year, the producer is not eligible for farm program payments for that year.  Any program payments erroneously paid will have to be returned, with interest. 

Note:  Technically, the FSA rules state that to comply with the AGI requirement for the applicable crop, program or fiscal year, a person or legal entity must provide either a completed Form CCC-941 for that year or a statement from a CPA or attorney that the average AGI does not exceed the applicable limitation.  But, in all cases, the portions of Form CCC-941 pertaining to consent of disclosure of tax information must be completed and signed by the person (or entity) subject to AGI compliance.  FSA 5-PL, Par. 294, subparagraph B.

The form must be personally signed by the applicant – either in their own name or, if the application is on behalf of an entity, by the designated officer(s).  If the applicant is a minor, the Form can be signed by a parent or guardian.  One spouse cannot sign for the other spouse, however, absent a duly executed power-of-attorney (POA).  Likewise, neither IRS Form 2848 nor an FSA POA (Form 211) is acceptable.  FSA 5-PL, Para. 302, Subparagraph C. 

Note:  A Table contained in the FSA 5-PL, Amendment 4, page 6-34 at Para. 302, subparagraph C, sets forth the signature authority for Form CCC-941. 

If the applicant is a grantor trust, the Form must denote the grantor’s name.  For a deceased person, Form CCC-941 may be filed by the surviving spouse, an authorized representative or an entity that is responsible for filing the final Federal income tax return for the decedent.  FSA 5-PL, Para. 302, subparagraph D.  If filing is by an authorized representative, proof of such authorization must be provided by attachment to Form CCC-941. 

If a Form CCC-941, as submitted to the IRS, is incomplete or illegible it will be returned to the FSA along with IRS Notice 1398 containing the reason(s) for the rejection.  FSA 5-PL, Para. 301, Subparagraph H.  The FSA will then contact the person or entity that submitted the Form and explain the reason(s) for the rejection as well as provide assistance to get the Form corrected.  Id., Subparagraph H. 

Form CCC-941 authorizes the FSA to obtain AGI data from the IRS.  When the IRS receives the Form, it matches the identity of the name on the Form with the tax records associated with the name.  The IRS then calculates AGI according to the FSA’s definition of the term and reports to the FSA whether the applicant is within the $900,000 threshold.  If the IRS reports to the FSA that a producer is over the AGI limit, FSA then sends the producer a letter informing them that they have 30 days to provide a third-party verification by a CPA or an attorney that the producer’s average AGI is within the threshold along with associated tax records. If an entity is the farmer, this letter will be required for both the entity and the individual. If, upon review, the FSA still deems the producer to not be eligible for benefits, the producer may file an administrative appeal within 30 days of the determination.

Note:   It’s important for a producer/applicant to respond to the FSA within the 30-day timeframe so as to preserver administrative appeal rights.  However, the FSA 5-PL does state that appeal rights exist even if requested information is not timely provided.  FSA 5-PL, Para. 297, Subparagraph E.

The failure to provide the FSA with correct and accurate information to establish AGI compliance can result in ineligibility for all program payments and benefits that are subject to the AGI limitation for the applicable years.  In addition, the producer/entity will have to refund any benefits already paid due to the incorrect information and face possible civil or criminal prosecution.  FSA 5-PL, Para. 297, Subparagraph D.

A person or entity that lacks tax records or is not required to file tax returns may document AGI by providing to FSA annual budgets and a statement of operations; annual public financial disclosures; financial statements; or any other documentation as FSA deems acceptable. 

Note:  Some farmers have expressed concern about the information the IRS shares with the FSA.  However, the IRS does not report the applicant’s income, AGI (or average AGI), or any determination on the applicant’s eligibility or ineligibility for farm program payments.  The IRS merely computes AGI according to the FSA approach and reports to the FSA whether the producer/applicant is over or under the applicable threshold.  FSA 5-PL, Para. 303, subparagraph B.  FSA maintains the information that the IRS provides to it in a secure database, and the information  is not subject to a Freedom of Information Act request.  Id., subparagraph C. 

Exception for Exceeding the AGI Threshold

The 75 percent test.  There are some farm programs for which the $900,000 AGI limit does not apply if at least 75 percent of AGI is derived from farming, ranching or forestry activities.  For this purpose, “farm AGI” is comparable to net income from farming and may be identical to net farm profit (or loss) on Schedule F.  The FSA definition of “farm AGI” also includes income from the sale of farmland, breeding livestock and ag conservation easements, for example.  However, the term does not include income derived from the sale of farm equipment as well as income derived from the sale of production inputs and services.  However, if at least two-thirds of total AGI from all sources is from farming, the income from the sale of farm equipment and production inputs and services counts as farm AGI.  FSA 5-PL, Para. 312, subparagraph F.    

In recent years, the market facilitation program (MFP) and the Coronavirus Food Assistance Program (CFAP) are examples of farm programs that don’t subject the applicant to a $900,000 AGI limitation.  A producer applying for benefits from such a program must certify that the 75 percent test is satisfied.  For this purpose, the FSA might require the producer to sign Form CCC-942.  Alternatively, a letter from the producer’s professional tax preparer (an attorney of a CPA) can suffice.  For entities that are applying for benefits, a certification letter is required for the entity and for the individual producer. 

Note:  The FSA cannot send certifications with respect to the 75 percent farm AGI test to the IRS for verification.

For purposes of the 75 percent test, the FSA, in a Table in the FSA 5-PL, Amendment 6, Para. 312, subparagraph B, defines income from farming, ranching and forestry.  The Table illustrates that the term is defined broadly.  

Wages paid by a farm employer do not constitute farm income.  Thus, if an applicant’s only income is from wages earned via employment with, for example, a farming C corporation, the wages do not count as farm income for purposes of the 75 percent test.  But, of course, this is only an issue if the producer/applicant’s income is over the $900,000 threshold. 

The FSA regulations and associated guidance do not address whether income from a farmer’s foreign sales that are funneled through an IC-DISC counts as farm income for purposes of the 75 percent test.  An IC-DISC allows a farmer that will be selling into an export market to essentially transfer income from the farmer to the tax-exempt IC-DISC via an export sales commission.  An IC-DISC can be formed and utilized by any taxpayer that manufactures, produces, grows or extracts (MPGE) property in the U.S. that is held primarily for sale, lease or rental in the ordinary course of the taxpayer’s trade or business.  That definition certainly includes farmers.  The property to be exported is transferred to the IC-DISC which then sells the assets into an export market.  While there is no “official” guidance on the issue, it would seem reasonable that such income counts as farm income. 

Conclusion

Farmers participating in federal farm programs are subject to many detailed rules.  In recent years, such payments have made up a substantial portion of total farm income.  That makes compliance with the rules and staying within the average AGI limit critical. 

April 10, 2021 in Income Tax, Regulatory Law | Permalink | Comments (0)

Monday, April 5, 2021

Tax Considerations When Leasing Farmland

Overview

 

A lot of farmland is leased.  Farmers (and landlords) are often good at understanding the components of economic risk associated with a farm lease and utilize the best type of lease accordingly.  But what about tax issues?  There are numerous income tax issues associated with leasing farmland.  Sometimes the tax issues of leasing also impact estate and business planning issues for the farm landlord.  These can be very important issues that shouldn’t be overlooked when deciding the type of lease to utilize. 

Tax and planning considerations when leasing farmland – it’s the topic of today’s post.

Types of Leases

Different types of agricultural land leasing arrangements exist.  The differences are generally best understood from a risk/return standpoint. 

  • Cash leases involve the periodic payment of a rental amount that is either a fixed number of dollars per acre, or a fixed amount for the entire farm. Typically, such amounts are payable in installments or in a lump sum. 
  • A flexible cash lease specifies that the amount of cash rent fluctuates with production conditions and/or crop or livestock prices.
  • A hybrid cash/guaranteed bushel lease contains elements similar to those found in crop-share leases. For example, a hybrid cash lease usually specifies that the rental amount is to be determined by multiplying a set number of bushels by a price determined according to terms of the lease, but at a later date.  The tenant will market the entire crop.  The landlord benefits from price increases, while requiring no management or selling decisions or capital outlay.  However, the rental amount is adversely affected by a decline in price.  The tenant, conversely, will not bear the entire risk of low commodity prices, as would be the case if a straight-cash lease were used, but does bear all of the production risk and must pay all of the production costs.  The tenant delivers a set amount of a certain type of grain to a buyer by a specified date.  The landlord determines when to sell the grain, and is given an opportunity to take advantage of price rises and to make his or her own marketing decisions.  However, the landlord must make marketing decisions, and also is subject to price decreases and the risk of crop failure.  For the tenant, the required capital outlay will likely be less, and the tenant should have greater flexibility as to cropping patterns.  While the rental amount may be less than under a straight-cash lease, the tenant will continue to bear the risk of crop failure. 
  • A minimum cash or crop share lease, involves a guaranteed cash minimum. However, the landlord has the opportunity to share in crop production from a good year (high price or high yield) without incurring out-of-pocket costs.  For a tenant, the minimum cash payment likely will be less than under a straight-cash lease because the landlord will receive a share of production in good years.  The tenant, however, still retains much of the production risk.  In addition, the tenant typically does not know until harvest whether the tenant will receive all or only part of the crop.  This may make forward cash contracting more difficult.
  • Under a crop-share leasing arrangement, the rent is paid on the basis of a specified proportion of the crops. The landlord may or may not agree to pay part of certain expenses.  There are several variations to the traditional crop-share arrangement.  For example, with a crop share/cash lease, rent is paid with a certain proportion of the crops, but a fixed sum is charged for selected acreage such as pasture or buildings, or both.  Under a livestock-share leasing arrangement, specified shares of livestock, livestock products and crops are paid as rent, with the landlord normally sharing in the expenses.  For irrigation crop-share leases, rent is a certain proportion of the crops produced, but the landlord shares part of the irrigation expenses.  Under labor-share leases, family members are typically involved and the family member owning the assets has most of the managerial responsibility and bears most of the expenses and receives most of the crops.  The other family members receive a share of yield proportionate to their respective labor and management inputs.

Self-Employment Tax 

Type of lease matters.  Self-employment tax is imposed on net earnings derived from self-employment. I.R.C. §1402. That phrase is defined as gross income derived by an individual from a trade or business that the taxpayer conducts.  Id.  However, rents from real estate and from personal property leased with real estate are excluded from the definition of net earnings from self-employment.  I.R.C. §1402(a)(1).  Likewise, income from crop-share and/or livestock-share rental arrangements for landlords who are not materially participating in the farming operation are not classified as self-employment income subject to Social Security tax (and, thus, do not count toward eligibility for Social Security benefits in retirement).  I.R.C. §1402(a)(1)(A).  Only if the rental income is produced under a crop or livestock-share lease where the individual is materially participating under the lease does the taxpayer generate self-employment income.  Id.

Avoiding self-employment tax.  Income received under a cash rental arrangement is not subject to self-employment tax, nor does such income count toward eligibility for Social Security benefits in retirement.  An exception to this rule exists if the lessor leases land to an entity in which the lessor is materially participating. I.R.C. §1402(a)(1)(A). IRS has won several cases in which they have successfully attributed the lessor’s material participation in the entity to the leasing arrangement with the result that passive cash rent income is transformed into material participation income subject to self-employment tax.  But, if the rental income represents a fair market rate of rate, the rental income is not subject to self-employment tax.  Martin v. Comr., 149 T.C. 293 (2017).  So, the key to avoiding self-employment tax on “self-rentals” is to make sure that the lease is a “passive” lease (i.e., a cash lease) and that the rental rate is set at a fair market rate of rent (or very closely to it). 

Material participation leases.  The key concept for farm landlords attempting to qualify rental income as self-employment subject to Social Security tax is material participation.  Rental income is self-employment income if it results from a material participation lease.  If the lease is a material participation lease, the income is subject to self-employment tax.  If it is not such a lease, the income is not subject to the tax.  A lease is a material participation lease if (1) it provides for material participation in the production or in the management of the production of agricultural or horticultural products, and (2) there is material participation by the landlord.  Both requirements must be satisfied.  While a written lease is not required, a written lease does make a material participation arrangement easier to establish.  In addition, agricultural program payments that are received under a crop-share or livestock-share lease are considered to be self-employment income for Social Security purposes if the landlord materially participates under the lease.

Observation:  Managing earned income in retirement years is important and can influence the type of lease that is utilized.  Once full retirement age is reached, a taxpayer can receive an unlimited amount of income without the loss of Social Security benefits.  Full retirement age is either 66, 67, or 66 and a certain number of months, depending on your year of birth.  For persons age 62 to 65, the earnings limit in 2021 is $18,240.  For excess amounts, benefits are reduced $1 for every $2 over the limit.   For a person reaching full retirement age in 2021, the limit increases to $50,520. Above that level, $1 in Social Security benefits are lost for every $3 of earnings.  A key point in all of this is that, for retired farm landlords under full retirement age, they may not be able to receive full Social Security benefits if they are materially participating under a lease.

Income Tax Considerations

USDA cost-sharing payments.  Under certain federal farm programs, especially those programs designed to provide environmental benefits, the USDA shares in part of the expense associated with complying with the program.  If certain requirements are satisfied, the farmer that receives cost-share payments can exclude them from income.  I.R.C. §126.  Crop-share and livestock-share landlords are eligible to exclude cost-share payments from income.

Soil and water conservation expenses.  Taxpayers engaged in farming can (upon satisfying several requirements) deduct soil and water conservation expenses in the year incurred under a one-time election, rather than capitalizing the expenditures.  I.R.C §175.  One of those requirements is that the taxpayer be engaged in the business of farming.  A farm operator or landowner receiving rental income under a crop-share or livestock-share lease satisfies the test.  But, a landlord collecting rental income on a cash rent basis is not eligible to deduct soil and water conservation expenses on the associated real estate.  The landlord must materially participate in the farming operation.    

Fertilizer and lime.  A taxpayer can deduct fertilizer and lime costs by making an election on the tax return, if the taxpayer is in the trade or business of farming. I.R.C. §180.  For farm landlords, the lease must be a crop-share or livestock-share lease.  A landlord under a cash rent lease cannot deduct the cost of fertilizer and lime.  A farm landlord must be materially participating under the lease. 

Interest.  Most farm interest is fully deductible as business interest.  Crop-share and livestock-share leases with substantial involvement in decisionmaking by the landlord are deemed to be “businesses” for this purpose.  

Farm income averaging.  Income averaging is available for farmers and fishermen, and allows current farm income to be averaged over three prior base years. I.R.C. §1301.  The provision is available by election (by filing Schedule J) and provides the benefit of applying lower income tax rates from the prior base years.  A “farming business” for purposes of income averaging is defined as the trade or business of farming involving the cultivation of land or the raising or harvesting of any agricultural or horticultural commodity and includes operating a nursery or sod farm or the raising or harvesting of trees bearing fruit, nuts, or other crop or ornamental trees (but not evergreen trees more than six years old when severed from the roots).  Also included in the definition is the raising, shearing, feeding, caring for, training and managing animals.  Crop-share landlords are deemed to be engaged in the business of farming if the lease is in writing and is entered into with the tenant before the tenant begins significant activities on the land. 

Special Use Valuation

As I wrote in a recent post, a special use valuation election can be made in an estate to value the farmland used in farming at its agricultural value rather than fair market value.  That eliminates factors that put upward price pressure on the land and helps the land stay in farming by the family be reducing or eliminating the federal estate tax on the decedent’s estate.  However, many tests have to be satisfied to make the election, one of which requires the decedent (if the decedent was a landlord) to have had material participation under a lease for five of the last eight years before the earlier of retirement, disability or death if a special use valuation election is going to be made for the agricultural real estate included in the decedent-to-be’s estate.  I.R.C. §2032A(b)(1)(A)

The solution, if a family member is present, may be to have a non-retired landlord not materially participate, but rent the land that is to be elected in the landlord’s estate upon death to a materially participating family member or to hire a family member as a farm manager.  Cash leasing of elected land to family members is permitted before the landlord dies, but generally not after death.  The solution, if a family member is not present, is to have the landlord retire at full retirement age or older, materially participate during five of the eight years immediately preceding retirement, and then during retirement rent out the farm via a non-material participation crop-share or livestock-share lease.

Leases and Farm Program Benefits

Leases can also have an impact on a producer’s eligibility for farm program payments.  In general, to qualify for farm program payments, an individual must be “actively engaged in farming.”  Each “person” who is actively engaged in farming is eligible for one payment limit of federal farm program payments.  A tenant qualifies as actively engaged in farming through the contribution of capital, equipment, active personal labor or active personal management.  Likewise, a landlord qualifies as actively engaged in farming by the contribution of the owned land if the rent or income for the operation’s use of the land is based on the land’s production or the operation’s results (not cash rent based on a guaranteed share of the crop).  In addition, the landlord’s contribution must be “significant,” must be “at risk,” and must be commensurate with the landlord’s share of the profits and losses from the farming operation. 

A landlord who cash leases land is considered a landlord under the payment limitation rules and may not be considered actively engaged in farming.  In this situation, only the tenant is considered eligible.  Under the payment limitation rules, there are technical requirements that restrict the cash-rent tenant’s eligibility to receive payments to situations in which the tenant makes a “significant contribution” of (1) active personal labor and capital, land or equipment; or (2) active personal management and equipment.

Conclusion

Utilizing the “correct” farm lease for your farming operation involves more than just the economics of the relationship.  Taxes and planning considerations also play an important role.  Properly consideration should be made.  Do your “due diligence.”

April 5, 2021 in Income Tax | Permalink | Comments (0)

Friday, April 2, 2021

Ag Law and Taxation - 2017 Bibliography

Overview

Today's post is a bibliography of my ag law and tax blog articles of 2017.  This will make it easier to find the articles you are looking for in your research.  In late January I posted the 2020 bibliography of articles.  In late February I posted the bibliography of the 2019 articles.  Last month, I posted the 2018 bibliography of articles.  Today’s posting is the bibliography of my 2017 articles.  Later this month I will post the 2016 bibliography. 

The library of content continues to grow with relevant information for you practice or your farming/ranching business.

The 2017 bibliography of articles – it’s the subject matter of today’s post.

BANKRUPTCY

The Most Important Agricultural Law and Tax Developments of 2016

https://lawprofessors.typepad.com/agriculturallaw/2017/01/the-most-important-agricultural-law-and-tax-developments-of-2016.html  

Top Ten Agricultural Law and Tax Developments of 2016 (Ten Through Six)

https://lawprofessors.typepad.com/agriculturallaw/2017/01/top-ten-agricultural-law-and-tax-developments-of-2016-ten-through-six.html

Top Ten Agricultural Law Developments of 2016 (Five Through One)

https://lawprofessors.typepad.com/agriculturallaw/2017/01/top-ten-agricultural-law-developments-of-2016-five-through-one.html

Farm Financial Stress – Debt Restructuring

https://lawprofessors.typepad.com/agriculturallaw/2017/01/farm-financial-stress-debt-restructuring.html

Qualified Farm Indebtedness – A Special Rule for Income Exclusion of Forgiven Debt

https://lawprofessors.typepad.com/agriculturallaw/2017/03/qualified-farm-indebtedness-a-special-rule-for-income-exclusion-of-forgiven-debt.html

What Are a Farmer’s Rights When a Grain Elevator Fails?

https://lawprofessors.typepad.com/agriculturallaw/2017/07/what-are-a-farmers-rights-when-a-grain-elevator-fails.html

Agricultural Law in a Nutshell

https://lawprofessors.typepad.com/agriculturallaw/2017/07/agricultural-law-in-a-nutshell.html

The Business of Agriculture – Upcoming CLE Symposium

https://lawprofessors.typepad.com/agriculturallaw/2017/08/the-business-of-agriculture-upcoming-cle-symposium.html

Tough Financial Times in Agriculture and Lending Clauses – Peril for the Unwary

https://lawprofessors.typepad.com/agriculturallaw/2017/10/tough-financial-times-in-agriculture-and-lending-clauses-peril-for-the-unwary.html

What Interest Rate Applies to a Secured Creditor’s Claim in a Reorganization Bankruptcy?

https://lawprofessors.typepad.com/agriculturallaw/2017/11/what-interest-rate-applies-to-a-secured-creditors-claim-in-a-reorganization-bankruptcy.html

PACA Trust Does Not Prevent Chapter 11 DIP’s Use of Cash Collateral

https://lawprofessors.typepad.com/agriculturallaw/2017/11/paca-trust-does-not-prevent-chapter-11-dips-use-of-cash-collateral.html

Are Taxes Dischargeable in Bankruptcy?

https://lawprofessors.typepad.com/agriculturallaw/2017/12/are-taxes-dischargeable-in-bankruptcy.html

Christmas Shopping Season Curtailed? – Bankruptcy Venue Shopping, That Is!

https://lawprofessors.typepad.com/agriculturallaw/2017/12/christmas-shopping-season-curtailed-bankruptcy-venue-shopping-that-is.html

BUSINESS PLANNING

The Most Important Agricultural Law and Tax Developments of 2016

https://lawprofessors.typepad.com/agriculturallaw/2017/01/the-most-important-agricultural-law-and-tax-developments-of-2016.html

Top Ten Agricultural Law and Tax Developments of 2016 (Ten Through Six)

https://lawprofessors.typepad.com/agriculturallaw/2017/01/top-ten-agricultural-law-and-tax-developments-of-2016-ten-through-six.html

Top Ten Agricultural Law Developments of 2016 (Five Through One)

https://lawprofessors.typepad.com/agriculturallaw/2017/01/top-ten-agricultural-law-developments-of-2016-five-through-one.html

C Corporation Penalty Taxes – Time to Dust-Off and Review?

https://lawprofessors.typepad.com/agriculturallaw/2017/01/c-corporation-penalty-taxes-time-to-dust-off-and-review.html

Divisive Reorganizations of Farming and Ranching Corporations

https://lawprofessors.typepad.com/agriculturallaw/2017/01/divisive-reorganizations-of-farming-and-ranching-corporations.html

The Scope and Effect of the “Small Partnership Exception”

https://lawprofessors.typepad.com/agriculturallaw/2017/02/the-scope-and-effect-of-the-small-partnership-exception.html

Using the Right Kind of an Entity to Reduce Self-Employment Tax

https://lawprofessors.typepad.com/agriculturallaw/2017/04/using-the-right-kind-of-an-entity-to-reduce-self-employment-tax.html

Employer-Provided Meals and Lodging

https://lawprofessors.typepad.com/agriculturallaw/2017/05/employer-provided-meals-and-lodging.html

Self-Employment Tax on Farming Activity of Trusts

https://lawprofessors.typepad.com/agriculturallaw/2017/05/self-employment-tax-on-farming-activity-of-trusts.html

Minority Shareholder Oppression Case Raises Several Tax Questions

https://lawprofessors.typepad.com/agriculturallaw/2017/05/minority-shareholder-oppression-case-raises-several-tax-questions.html

Farm Program Payment Limitations and Entity Planning – Part One

https://lawprofessors.typepad.com/agriculturallaw/2017/06/farm-program-payment-limitations-and-entity-planning-part-one.html

Farm Program Payment Limitations and Entity Planning – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2017/06/farm-program-payment-limitations-and-entity-planning-part-two.html

Summer Ag Tax/Estate and Business Planning Conference

https://lawprofessors.typepad.com/agriculturallaw/2017/06/summer-ag-taxestate-and-business-planning-conference.html

An Installment Sale as Part of an Estate Plan

https://lawprofessors.typepad.com/agriculturallaw/2017/07/an-installment-sale-as-part-of-an-estate-plan.html

The Use of a Buy-Sell Agreement for Transitioning a Business

https://lawprofessors.typepad.com/agriculturallaw/2017/08/the-use-of-a-buy-sell-agreement-for-transitioning-a-business.html

The Business of Agriculture – Upcoming CLE Symposium

https://lawprofessors.typepad.com/agriculturallaw/2017/08/the-business-of-agriculture-upcoming-cle-symposium.html

Forming a Farming/Ranching Corporation Tax-Free

https://lawprofessors.typepad.com/agriculturallaw/2017/08/forming-a-farmingranching-corporation-tax-free.html

Farmers Renting Equipment – Does it Trigger A Self-Employment Tax Liability?

https://lawprofessors.typepad.com/agriculturallaw/2017/08/farmers-renting-equipment-does-it-trigger-a-self-employment-tax-liability.html

New Partnership Audit Rules

https://lawprofessors.typepad.com/agriculturallaw/2017/09/new-partnership-audit-rules.html

Self-Employment Tax on Farm Rental Income – Is the Mizell Veneer Cracking?

https://lawprofessors.typepad.com/agriculturallaw/2017/09/self-employment-tax-on-farm-rental-income-is-the-mizell-veneer-cracking.html

IRS To Finalize Regulations on Tax Status of LLC and LLP Members?

https://lawprofessors.typepad.com/agriculturallaw/2017/10/irs-to-finalize-regulations-on-tax-status-of-llc-and-llp-members.html

H.R. 1 – Farmers, Self-Employment Tax and Business Arrangement Structures

https://lawprofessors.typepad.com/agriculturallaw/2017/11/hr-1-farmers-self-employment-tax-and-business-arrangement-structures.html

Summer 2018 – Farm Tax and Farm Business Education

https://lawprofessors.typepad.com/agriculturallaw/2017/11/summer-2018-farm-tax-and-farm-business-education.html

Partnerships and Tax Law – Details Matter

https://lawprofessors.typepad.com/agriculturallaw/2017/11/partnership-and-tax-law-details-matter.html   

CIVIL LIABILITIES

The Most Important Agricultural Law and Tax Developments of 2016

https://lawprofessors.typepad.com/agriculturallaw/2017/01/the-most-important-agricultural-law-and-tax-developments-of-2016.html

Top Ten Agricultural Law and Tax Developments of 2016 (Ten Through Six)

https://lawprofessors.typepad.com/agriculturallaw/2017/01/top-ten-agricultural-law-and-tax-developments-of-2016-ten-through-six.html

Top Ten Agricultural Law and Developments of 2016 (Five Through One)

https://lawprofessors.typepad.com/agriculturallaw/2017/01/top-ten-agricultural-law-developments-of-2016-five-through-one.html

Recreational Use Statutes – What is Covered?

https://lawprofessors.typepad.com/agriculturallaw/2017/02/recreational-use-statutes-what-is-covered.html

Is Aesthetic Damage Enough to Make Out a Nuisance Claim?

https://lawprofessors.typepad.com/agriculturallaw/2017/04/is-aesthetic-damage-enough-to-make-out-a-nuisance-claim.html

Liability Associated with a Range of Fires and Controlled Burns

https://lawprofessors.typepad.com/agriculturallaw/2017/04/liability-associated-with-a-range-fires-and-controlled-burns.html

What’s My Liability for Spread of Animal Disease

https://lawprofessors.typepad.com/agriculturallaw/2017/06/whats-my-liability-for-spread-of-animal-disease.html

Dicamba Spray-Drift Issues

https://lawprofessors.typepad.com/agriculturallaw/2017/07/dicamba-spray-drift-issues.html

Agricultural Law in a Nutshell

https://lawprofessors.typepad.com/agriculturallaw/2017/07/agricultural-law-in-a-nutshell.html

The Business of Agriculture – Upcoming CLE Symposium

https://lawprofessors.typepad.com/agriculturallaw/2017/08/the-business-of-agriculture-upcoming-cle-symposium.html

Right-to-Farm Laws

            https://lawprofessors.typepad.com/agriculturallaw/2017/09/right-to-farm-laws.html

CONTRACTS

The Most Important Agricultural Law and Tax Developments of 2016

https://lawprofessors.typepad.com/agriculturallaw/2017/01/the-most-important-agricultural-law-and-tax-developments-of-2016.html

Top Ten Agricultural Law and Tax Developments of 2016 (Ten Through Six)

https://lawprofessors.typepad.com/agriculturallaw/2017/01/top-ten-agricultural-law-and-tax-developments-of-2016-ten-through-six.html

Top Ten Agricultural Law Developments of 2016 (Five Through One)

https://lawprofessors.typepad.com/agriculturallaw/2017/01/top-ten-agricultural-law-developments-of-2016-five-through-one.html

Another Issue With Producing Livestock on Contract – Insurance

https://lawprofessors.typepad.com/agriculturallaw/2017/01/another-issue-with-producing-livestock-on-contract-insurance.html

The Ability of Tenants-in-Common To Bind Co-Tenants to a Farm Lease – and Related Issues

https://lawprofessors.typepad.com/agriculturallaw/2017/02/the-ability-of-tenants-in-common-to-bind-co-tenants-to-a-farm-lease-and-related-issues.html

Ag Goods Sold at Auction – When is a Contract Formed?

https://lawprofessors.typepad.com/agriculturallaw/2017/05/ag-goods-sold-at-auction-when-is-a-contract-formed.html

Agricultural Law in a Nutshell

https://lawprofessors.typepad.com/agriculturallaw/2017/07/agricultural-law-in-a-nutshell.html

The Business of Agriculture – Upcoming CLE Symposium

https://lawprofessors.typepad.com/agriculturallaw/2017/08/the-business-of-agriculture-upcoming-cle-symposium.html

Ag Contracts and Express Warranties

https://lawprofessors.typepad.com/agriculturallaw/2017/09/ag-contracts-and-express-warranties.html

What Remedies Does a Buyer Have When a Seller of Ag Goods Breaches the Contract?           

https://lawprofessors.typepad.com/agriculturallaw/2017/10/what-remedies-does-a-buyer-have-when-a-seller-of-ag-goods-breaches-the-contract.html  

COOPERATIVES

The Most Important Agricultural Law and Tax Developments of 2016

https://lawprofessors.typepad.com/agriculturallaw/2017/01/the-most-important-agricultural-law-and-tax-developments-of-2016.html

Top Ten Agricultural Law Developments of 2016 (Five Through One)

https://lawprofessors.typepad.com/agriculturallaw/2017/01/top-ten-agricultural-law-and-tax-developments-of-2016-ten-through-six.html

What Is a Cooperative Director’s Liability to Member-Shareholders and Others?

https://lawprofessors.typepad.com/agriculturallaw/2017/07/what-is-a-cooperative-directors-liability-to-member-shareholders-and-others.html

CRIMINAL LIABILITIES

The Necessity Defense to Criminal Liability

https://lawprofessors.typepad.com/agriculturallaw/2017/05/the-necessity-defense-to-criminal-liability.html

The Business of Agriculture – Upcoming CLE Symposium

https://lawprofessors.typepad.com/agriculturallaw/2017/08/the-business-of-agriculture-upcoming-cle-symposium.html

What Problems Does The Migratory Bird Treaty Act Pose For Farmers, Ranchers and Rural Landowners?

https://lawprofessors.typepad.com/agriculturallaw/2017/08/what-problems-does-the-migratory-bird-treaty-act-pose-for-farmers-ranchers-and-rural-landowners.html

ENVIRONMENTAL LAW

Drainage Activities on Farmland and the USDA

https://lawprofessors.typepad.com/agriculturallaw/2017/03/drainage-activities-on-farmland-and-the-usda.html

The Application of the Endangered Species Act to Activities on Private Land

https://lawprofessors.typepad.com/agriculturallaw/2017/04/the-application-of-the-endangered-species-act-to-activities-on-private-land.html

Eminent Domain – The Government’s Power to “Take” Private Property

https://lawprofessors.typepad.com/agriculturallaw/2017/06/eminent-domain-the-governments-power-to-take-private-property.html

Spray Drift As Hazardous Waste?

https://lawprofessors.typepad.com/agriculturallaw/2017/07/spray-drift-as-hazardous-waste.html

What Problems Does The Migratory Bird Treaty Act Pose For Farmers, Ranchers and Rural Landowners?

https://lawprofessors.typepad.com/agriculturallaw/2017/08/what-problems-does-the-migratory-bird-treaty-act-pose-for-farmers-ranchers-and-rural-landowners.html

The Prior Converted Cropland Exception From Clean Water Act Jurisdiction

https://lawprofessors.typepad.com/agriculturallaw/2017/09/the-prior-converted-cropland-exception-from-clean-water-act-jurisdiction.html

Air Emission Reporting Requirement For Livestock Operations

https://lawprofessors.typepad.com/agriculturallaw/2017/11/air-emission-reporting-requirement-for-livestock-operations.html

ESTATE PLANNING

Rights of Refusal and the Rule Against Perpetuities

https://lawprofessors.typepad.com/agriculturallaw/2017/01/rights-of-refusal-and-the-rule-against-perpetuities.html

Some Thoughts On Long-Term Care Insurance

https://lawprofessors.typepad.com/agriculturallaw/2017/02/some-thoughts-on-long-term-care-insurance.html

Overview of Gifting Rules and Strategies                                                                 

https://lawprofessors.typepad.com/agriculturallaw/2017/04/overview-of-gifting-rules-and-strategies.html

Disinheriting a Spouse – Can It Be Done?

https://lawprofessors.typepad.com/agriculturallaw/2017/04/disinheriting-a-spouse-can-it-be-done.html

Specific Property Devised in Will (or Trust) That Doesn’t Exist At Death – What Happens?

https://lawprofessors.typepad.com/agriculturallaw/2017/05/specific-property-devised-in-will-that-doesnt-exist-at-death-what-happens.html

Discounting IRAs for Income Tax Liability?

https://lawprofessors.typepad.com/agriculturallaw/2017/05/discounting-iras-for-income-tax-liability.html

Special Use Valuation and Cash Leasing

https://lawprofessors.typepad.com/agriculturallaw/2017/05/special-use-valuation-and-cash-leasing.html

Self-Employment Tax On Farming Activity Of Trusts

https://lawprofessors.typepad.com/agriculturallaw/2017/05/self-employment-tax-on-farming-activity-of-trusts.html

Would an Interest Charge Domestic International Sales Corporation Benefit a Farming Business?

https://lawprofessors.typepad.com/agriculturallaw/2017/07/would-an-interest-charge-domestic-international-sales-corporation-benefit-a-farming-business.html

An Installment Sale as Part of An Estate Plan

https://lawprofessors.typepad.com/agriculturallaw/2017/07/an-installment-sale-as-part-of-an-estate-plan.html

Using An IDGT For Wealth Transfer and Business Succession

https://lawprofessors.typepad.com/agriculturallaw/2017/07/using-an-idgt-for-wealth-transfer-and-business-succession.html

Federal Tax Claims in Decedent’s Estates – What’s the Liability and Priority?

https://lawprofessors.typepad.com/agriculturallaw/2017/08/federal-tax-claims-in-decedents-estates-whats-the-liability-and-priority.html

Estate Tax Portability – The Authority of the IRS To Audit

https://lawprofessors.typepad.com/agriculturallaw/2017/10/estate-tax-portability-the-authority-of-the-irs-to-audit.html

Digital Assets and Estate Planning       

https://lawprofessors.typepad.com/agriculturallaw/2017/10/digital-assets-and-estate-planning.html

INCOME TAX

The Burden of Proof in Tax Cases – What are the Rules?

https://lawprofessors.typepad.com/agriculturallaw/2017/02/the-burden-of-proof-in-tax-cases-what-are-the-rules.html

The Home Office Deduction

https://lawprofessors.typepad.com/agriculturallaw/2017/02/the-home-office-deduction.html

IRS To Continue Attacking Cash Method For Farmers Via the “Farming Syndicate Rule”

https://lawprofessors.typepad.com/agriculturallaw/2017/02/irs-to-continue-attacking-cash-method-for-farmers-via-the-farming-syndicate-rule.html

Using Schedule J As A Planning Tool For Clients With Farm Income

https://lawprofessors.typepad.com/agriculturallaw/2017/03/using-schedule-j-as-a-planning-tool-for-clients-with-farm-income.html

Deductibility of Soil and Water Conservation Expenses

https://lawprofessors.typepad.com/agriculturallaw/2017/03/deductibility-of-soil-and-water-conservation-expenses.html

Should Purchased Livestock Be Depreciated or Inventoried?

https://lawprofessors.typepad.com/agriculturallaw/2017/03/should-purchased-livestock-be-depreciated-or-inventoried.html

The Changing Structure of Agricultural Production and…the IRS

https://lawprofessors.typepad.com/agriculturallaw/2017/03/the-changing-structure-of-agricultural-production-andthe-irs.html

Farm-Related Casualty Losses and Involuntary Conversions – Helpful Tax Rules in Times of Distress

https://lawprofessors.typepad.com/agriculturallaw/2017/03/farm-related-casualty-losses-and-involuntary-conversions-helpful-tax-rules-in-times-of-distress.html

Charitable Contributions Via Trust

https://lawprofessors.typepad.com/agriculturallaw/2017/03/charitable-contributions-via-trust.html

Ag Tax Policy The Focus in D.C.

https://lawprofessors.typepad.com/agriculturallaw/2017/04/ag-tax-policy-the-focus-in-dc-.html

For Depreciation Purposes, What Does Placed in Service Mean?

https://lawprofessors.typepad.com/agriculturallaw/2017/04/for-depreciation-purposes-what-does-placed-in-service-mean.html

Tax Treatment of Commodity Futures and Options

https://lawprofessors.typepad.com/agriculturallaw/2017/04/tax-treatment-of-commodity-futures-and-options.html

Discounting IRAs for Income Tax Liability?

https://lawprofessors.typepad.com/agriculturallaw/2017/05/discounting-iras-for-income-tax-liability.html

Like-Kind Exchanges, Reverse Exchanges, and the Safe Harbor

https://lawprofessors.typepad.com/agriculturallaw/2017/05/like-kind-exchanges-reverse-exchanges-and-the-safe-harbor.html

Insights Into Handling IRS Disputes

https://lawprofessors.typepad.com/agriculturallaw/2017/05/insights-into-handling-irs-disputes.html

Employer-Provided Meals and Lodging

https://lawprofessors.typepad.com/agriculturallaw/2017/05/employer-provided-meals-and-lodging.html

Self-Employment Tax On Farming Activity Of Trusts

https://lawprofessors.typepad.com/agriculturallaw/2017/05/self-employment-tax-on-farming-activity-of-trusts.html

Minority Shareholder Oppression Case Raises Several Tax Questions

https://lawprofessors.typepad.com/agriculturallaw/2017/05/minority-shareholder-oppression-case-raises-several-tax-questions.html

Input Costs – When Can a Deduction Be Claimed?

https://lawprofessors.typepad.com/agriculturallaw/2017/06/input-costs-when-can-a-deduction-be-claimed.html

Like-Kind Exchange Issues

https://lawprofessors.typepad.com/agriculturallaw/2017/06/like-kind-exchange-issues.html

Tax Issues With Bad Debt Deductions

https://lawprofessors.typepad.com/agriculturallaw/2017/06/tax-issues-with-bad-debt-deductions.html

Like-Kind Exchanges – The Related Party Rule and a Planning Opportunity

https://lawprofessors.typepad.com/agriculturallaw/2017/06/like-kind-exchanges-the-related-party-rule-and-a-planning-opportunity.html

Tax Treatment of Cooperative Value-Added Payments

https://lawprofessors.typepad.com/agriculturallaw/2017/06/tax-treatment-of-cooperative-value-added-payments.html

Would an Interest Charge Domestic International Sales Corporation Benefit a Farming Business?

https://lawprofessors.typepad.com/agriculturallaw/2017/07/would-an-interest-charge-domestic-international-sales-corporation-benefit-a-farming-business.html

Timber Tax Issues – Part One

https://lawprofessors.typepad.com/agriculturallaw/2017/07/timber-tax-issues-part-one.html

Timber Tax Issues – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2017/07/timber-tax-issues-part-two.html

An Installment Sale as Part of An Estate Plan

https://lawprofessors.typepad.com/agriculturallaw/2017/07/an-installment-sale-as-part-of-an-estate-plan.html

Using An IDGT For Wealth Transfer and Business Succession

https://lawprofessors.typepad.com/agriculturallaw/2017/07/using-an-idgt-for-wealth-transfer-and-business-succession.html

Prospects for Tax Legislation

https://lawprofessors.typepad.com/agriculturallaw/2017/08/prospects-for-tax-legislation.html

Deferred Payment Contracts

https://lawprofessors.typepad.com/agriculturallaw/2017/08/deferred-payment-contracts.html

When Is A Farmer Not A “Qualified Farmer” For Conservation Easement Donation Purposes?

https://lawprofessors.typepad.com/agriculturallaw/2017/08/when-is-a-farmer-not-a-qualified-farmer-for-conservation-easement-donation-purposes.html

Substantiating Charitable Contributions

https://lawprofessors.typepad.com/agriculturallaw/2017/08/substantiating-charitable-contributions.html

Forming a Farming/Ranching Corporation Tax-Free

https://lawprofessors.typepad.com/agriculturallaw/2017/08/forming-a-farmingranching-corporation-tax-free.html

Farmers Renting Equipment – Does It Trigger A Self-Employment Tax Liability?

https://lawprofessors.typepad.com/agriculturallaw/2017/08/farmers-renting-equipment-does-it-trigger-a-self-employment-tax-liability.html

Commodity Credit Corporation Loans and Elections

https://lawprofessors.typepad.com/agriculturallaw/2017/09/commodity-credit-corporation-loans-and-elections.html

New Partnership Audit Rules

https://lawprofessors.typepad.com/agriculturallaw/2017/09/new-partnership-audit-rules.html

Alternatives to Like-Kind Exchanges of Farmland

https://lawprofessors.typepad.com/agriculturallaw/2017/09/alternatives-to-like-kind-exchanges-of-farmland.html

South Dakota Attempts To Change Internet Sales Taxation – What Might Be The Impact On Small Businesses?

https://lawprofessors.typepad.com/agriculturallaw/2017/09/south-dakota-attempts-to-change-internet-sales-taxation-what-might-be-the-impact-on-small-businesses.html

Fall Tax Schools

https://lawprofessors.typepad.com/agriculturallaw/2017/09/fall-tax-schools.html

Self-Employment Tax on Farm Rental Income – Is the Mizell Veneer Cracking?

https://lawprofessors.typepad.com/agriculturallaw/2017/09/self-employment-tax-on-farm-rental-income-is-the-mizell-veneer-cracking.html

Tax Treatment of Settlements and Court Judgments

https://lawprofessors.typepad.com/agriculturallaw/2017/10/tax-treatment-of-settlements-and-court-judgments.html

The “Perpetuity” Requirement For Donated Easements

https://lawprofessors.typepad.com/agriculturallaw/2017/10/the-perpetuity-requirement-for-donated-easements.html

The Tax Rules Involving Prepaid Farm Expenses

https://lawprofessors.typepad.com/agriculturallaw/2017/10/the-tax-rules-involving-prepaid-farm-expenses.html

It’s Just About Tax School Time

https://lawprofessors.typepad.com/agriculturallaw/2017/10/its-just-about-tax-school-time.html

IRS To Finalize Regulations On Tax Status of LLC and LLP Members?

https://lawprofessors.typepad.com/agriculturallaw/2017/10/irs-to-finalize-regulations-on-tax-status-of-llc-and-llp-members.html

The Deductibility (Or Non-Deductibility) of Interest

https://lawprofessors.typepad.com/agriculturallaw/2017/10/the-deductibility-or-non-deductibility-of-interest.html

H.R. 1 - Farmers, Self-Employment Tax and Business Arrangement Structures

https://lawprofessors.typepad.com/agriculturallaw/2017/11/hr-1-farmers-self-employment-tax-and-business-arrangement-structures.html

The Broad Reach of the Wash-Sale Rule

https://lawprofessors.typepad.com/agriculturallaw/2017/11/the-broad-reach-of-the-wash-sale-rule.html

Comparison of the House and Senate Tax Bills – Implications for Agriculture

https://lawprofessors.typepad.com/agriculturallaw/2017/11/comparison-of-the-house-and-senate-tax-bills-implications-for-agriculture.html

Partnerships and Tax Law – Details Matter

https://lawprofessors.typepad.com/agriculturallaw/2017/11/partnership-and-tax-law-details-matter.html

Senate Clears Tax Bill - On To Conference

https://lawprofessors.typepad.com/agriculturallaw/2017/12/senate-clears-tax-bill-on-to-conference-committee.html

Are Taxes Dischargeable in Bankruptcy?

https://lawprofessors.typepad.com/agriculturallaw/2017/12/are-taxes-dischargeable-in-bankruptcy.html

Bitcoin Fever and the Tax Man

https://lawprofessors.typepad.com/agriculturallaw/2017/12/bitcoin-fever-and-the-tax-man.html

House and Senate to Vote on Conference Tax Bill This Week

https://lawprofessors.typepad.com/agriculturallaw/2017/12/house-and-senate-to-vote-on-conference-tax-bill-this-week.html

Another Tax Bill Introduced, Year-End Planning, and Jan. 10 Seminar/Webinar

https://lawprofessors.typepad.com/agriculturallaw/2017/12/another-tax-bill-introduced-year-end-planning-and-jan-10-seminarwebinar.html

PUBLICATIONS

Agricultural Law in a Nutshell

https://lawprofessors.typepad.com/agriculturallaw/2017/07/agricultural-law-in-a-nutshell.html

REAL PROPERTY

Another Issue When the Definition of “Agriculture” Matters – Property Tax

https://lawprofessors.typepad.com/agriculturallaw/2017/01/another-issue-when-the-definition-of-agriculture-matters-property-tax.html

The Ability of Tenants-in-Common To Bind Co-Tenants to a Farm Lease – and Related Issues

https://lawprofessors.typepad.com/agriculturallaw/2017/02/the-ability-of-tenants-in-common-to-bind-co-tenants-to-a-farm-lease-and-related-issues.html

Like-Kind Exchanges, Reverse Exchanges, and the Safe Harbor

https://lawprofessors.typepad.com/agriculturallaw/2017/05/like-kind-exchanges-reverse-exchanges-and-the-safe-harbor.html

Like-Kind Exchange Issues

https://lawprofessors.typepad.com/agriculturallaw/2017/06/like-kind-exchange-issues.html

Easements on Agricultural Land – Classification and Legal Issues

https://lawprofessors.typepad.com/agriculturallaw/2017/08/easements-on-agricultural-land-classification-and-legal-issues.html

Should I Enter Into An Oil and Gas Lease?

https://lawprofessors.typepad.com/agriculturallaw/2017/12/should-i-enter-into-an-oil-and-gas-lease.html

REGULATORY LAW

Checkoffs, The Courts and Free Speech

https://lawprofessors.typepad.com/agriculturallaw/2017/01/checkoffs-the-courts-and-free-speech.html

Joint Employment Situations In Agriculture – What’s the FLSA Test?

https://lawprofessors.typepad.com/agriculturallaw/2017/02/joint-employment-situations-in-agriculture-whats-the-flsa-test.html

Farmers, Ranchers and Government Administrative Agencies

https://lawprofessors.typepad.com/agriculturallaw/2017/03/farmers-ranchers-and-government-administrative-agencies.html

IRS To Target “Hobby” Farmers

https://lawprofessors.typepad.com/agriculturallaw/2017/03/irs-to-target-hobby-farmers.html

Drainage Activities on Farmland and the USDA

https://lawprofessors.typepad.com/agriculturallaw/2017/03/drainage-activities-on-farmland-and-the-usda.html

What is a “Separate Person” For Payment Limitation Purposes?

https://lawprofessors.typepad.com/agriculturallaw/2017/03/what-is-a-separate-person-for-payment-limitation-purposes.html

Livestock Indemnity Payments – What They Are and Tax Reporting Options

https://lawprofessors.typepad.com/agriculturallaw/2017/03/livestock-indemnity-payments-what-they-are-and-tax-reporting-options.html

Can One State Regulate Agricultural Production Activities in Other States?

https://lawprofessors.typepad.com/agriculturallaw/2017/06/can-one-state-regulate-agricultural-production-activities-in-other-states.html

Farm Program Payment Limitations and Entity Planning – Part One

https://lawprofessors.typepad.com/agriculturallaw/2017/06/farm-program-payment-limitations-and-entity-planning-part-one.html

Farm Program Payment Limitations and Entity Planning – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2017/06/farm-program-payment-limitations-and-entity-planning-part-two.html

Eminent Domain – The Government’s Power to “Take” Private Property

https://lawprofessors.typepad.com/agriculturallaw/2017/06/eminent-domain-the-governments-power-to-take-private-property.html

Department of Labor Overtime Rules Struck Down – What’s the Impact on Ag?

https://lawprofessors.typepad.com/agriculturallaw/2017/09/department-of-labor-overtime-rules-struck-down-whats-the-impact-on-ag.html

The Prior Converted Cropland Exception From Clean Water Act Jurisdiction

https://lawprofessors.typepad.com/agriculturallaw/2017/09/the-prior-converted-cropland-exception-from-clean-water-act-jurisdiction.html

Air Emission Reporting Requirement For Livestock Operations

https://lawprofessors.typepad.com/agriculturallaw/2017/11/air-emission-reporting-requirement-for-livestock-operations.html

Federal Labor Law and Agriculture

https://lawprofessors.typepad.com/agriculturallaw/2017/11/federal-labor-law-and-agriculture.html

 Electronic Logs For Truckers and Implications for Agriculture

https://lawprofessors.typepad.com/agriculturallaw/2017/12/electronic-logs-for-truckers-and-implications-for-agriculture.html

SECURED TRANSACTIONS

Ag Supply Dealer Liens – Important Tool in Tough Financial Times

https://lawprofessors.typepad.com/agriculturallaw/2017/01/ag-supply-dealer-liens-important-tool-in-tough-financial-times.html

“Commercial Reasonableness” of Collateral Sales

https://lawprofessors.typepad.com/agriculturallaw/2017/07/commercial-reasonableness-of-collateral-sales.html

What Are A Farmer’s Rights When a Grain Elevator Fails?

https://lawprofessors.typepad.com/agriculturallaw/2017/07/what-are-a-farmers-rights-when-a-grain-elevator-fails.html

Selling Collateralized Ag Products – The “Farm Products” Rule

https://lawprofessors.typepad.com/agriculturallaw/2017/09/selling-collateralized-ag-products-the-farm-products-rule.html

SEMINARS AND CONFERENCES

Fall Tax Schools

https://lawprofessors.typepad.com/agriculturallaw/2017/09/fall-tax-schools.html

Another Tax Bill Introduced, Year-End Planning, and Jan. 10 Seminar/Webinar

https://lawprofessors.typepad.com/agriculturallaw/2017/12/another-tax-bill-introduced-year-end-planning-and-jan-10-seminarwebinar.html

Summer 2018 - Farm Tax and Farm Business Education

https://lawprofessors.typepad.com/agriculturallaw/2017/11/summer-2018-farm-tax-and-farm-business-education.html

The Business of Agriculture – Upcoming CLE Symposium

https://lawprofessors.typepad.com/agriculturallaw/2017/08/the-business-of-agriculture-upcoming-cle-symposium.html

Summer Ag Tax/Estate and Business Planning Conference

https://lawprofessors.typepad.com/agriculturallaw/2017/06/summer-ag-taxestate-and-business-planning-conference.html

WATER LAW

Prior Appropriation – First in Time, First in Right

https://lawprofessors.typepad.com/agriculturallaw/2017/02/prior-appropriation-first-in-time-first-in-right.html

Kansas Water Law - Reactions to and Potential Consequences of the Garetson decision

https://lawprofessors.typepad.com/agriculturallaw/2017/02/kansas-water-law-reactions-to-and-potential-consequences-of-the-garetson-decision.html

Public Access To Private Land Via Water

https://lawprofessors.typepad.com/agriculturallaw/2017/04/public-access-to-private-land-via-water.html

Big Development for Water in the West - Federal Implied Reserved Water Rights Doctrine Applies to Groundwater

https://lawprofessors.typepad.com/agriculturallaw/2017/12/big-development-for-water-in-the-west-federal-implied-reserved-water-rights-doctrine-applies-to-grou.html

April 2, 2021 in Bankruptcy, Business Planning, Civil Liabilities, Contracts, Cooperatives, Criminal Liabilities, Environmental Law, Estate Planning, Income Tax, Insurance, Real Property, Regulatory Law, Secured Transactions, Water Law | Permalink | Comments (0)

Wednesday, March 31, 2021

Farmland in an Estate – Special Use Valuation and the 25 Percent Test

Overview

Fifty years ago, concerns began to arise in the farm sector about farmland being valued in decedents’ estates at values reflecting commercial development potential rather than values reflecting agricultural purposes.   The concern was particularly acute if the family desired to continue the farming operation after their family member died.  At the time, the federal estate tax exemption was $60,000 and the top rate was 77 percent on gross estate values exceeding $10 million.

The Congress responded by enacting I.R.C. §2032A – special use valuation.  This allows, by election, farmland to be valued in a decedent’s estate for federal estate tax purposes at its value for farming purposes.  But it’s a very complex provision.  One of those complexities, the “25 percent test,” is a key component with an interesting history.

Special use valuation’s 25 percent test – it’s the topic of today’s post.

 Special Use Valuation – Background and Basic Qualification Requirements

The Tax Reform Act of 1976 provided a legislative solution to the perceived problem facing rural landowners of having the farmland in their estates taxed at fair market value (based on a “willing buyer/willing seller” test) reflective of commercial development potential, and based the ability of the IRS to use fluctuating values in agricultural land markets to its advantage.  That solution, in the form of the enactment of I.R.C. §2032A, allows the executor of a decedent’s estate to value farmland in the estate at its value for agricultural purposes rather than fair market value.  The basic idea of the provision is to relieve farm families from having to sell an eligible family farm or business when the income from its present use is insufficient to pay the tax calculated upon its highest and best use.  In recent months, the heightened uncertainty over the future level of the federal estate tax exemption (as well as federal estate tax rate(s)) has increased interest in the utilization of special use valuation. 

Because of the significant tax benefits that can be derived by a decedent’s estate making an election to value qualified elected land under a special use valuation election, numerous requirements must be satisfied.  The following is a listing of the pre-death requirements that an estate must satisfy to make an I.R.C. §2032A election:  

  • The real estate used in farming together with the farm personal property must make up at least 50 percent of the adjusted value of the decedent’s gross estate, using fair market value figures, and that amount or more must pass to qualified heirs. I.R.C. § 2032A(b)(1)(A)
  • The decedent or a member of the decedent’s family must have had an equity interest in the farm operation at the time of death and for five or more of the last eight years before death. I.R.C. §2032A(a)(1), (b)(1)(C)(i).
  • The real estate must have been owned by the decedent or a member of the family and held for a qualified use during five or more years in the eight-year period ending with the decedent’s death. I.R.C. §2032A(b)(1)(C)(i). 
  • The decedent or a member of the decedent’s family must have materially participated in the farming operation for at least five out of the eight years immediately preceding the earlier of the decedent’s death, disability or retirement. I.R.C. §2032A(b)(1)(C)(ii). 
  • The farmland and personal property used in farming must have been “acquired from the decedent to a qualified heir or passed from the decedent” to a qualified heir. I.R.C. 2032A(e)(9). 
  • For land owned by a partnership, the decedent must have had an interest in a closely-held business. I.R.C. § 2032A(g); 6166(b)(1)(B).

The 25 Percent Test

An additional test requirement that must be satisfied for a decedent’s estate to be eligible to make a special use valuation election is that the farmland that is eligible for a special use valuation election must also make up at least 25 percent of the adjusted value of the decedent’s gross estate. I.R.C. §2032A(b)(1)(B).  That requirement sounds simple enough.  However, a question has been raised whether the 25 percent test be satisfied only with property that is subject to a special use valuation election?  Historically, the IRS thought that it did, and adopted a regulation specifying just that.  See Priv. Ltr. Rul. 8042009 (Jun. 30, 1980); Treas. Reg. §20.2032A-8(a)(2).  In 1988, however, the Federal District Court for the Central District of Illinois invalidated the regulation. Miller v. United States, 680 F. Supp. 1269 (C.D. Ill. 1988).  But, the IRS kept auditing and re-litigated the issue, culminating in another court opinion on the matter in 2012.  The IRS lost again. 

The 2012 Case -Finfrock v. United States

In Finfrock v. United States, 860 F. Supp. 2d 651 (C.D. Ill. 2012), the decedent owned 61.05 percent of the stock of Finfrock Farms, Inc. The corporation owned four tracts of real estate – tracts of 40 acres, 122.5 acres, 377.21 acres and 165 acres.  There was no question that the ownership test was satisfied, or that the 50 percent or 25 percent tests were satisfied.  Indeed, the adjusted value of the gross estate was $2,608,848 including the farmland which was valued at 1,775,000.  For the entire eight-year period preceding the decedent’s death, a son farmed the land, and upon the decedent’s death the ownership of the corporation passed to qualified members of the decedent’s family.  The estate elected special use valuation as to the fourth tract of farmland because that was the only tract that the family wished to continue to farm.  The other tracts were sold to unrelated persons shortly after the decedent died.  The fair market value of the fourth tract was $402,930, or about 15 percent of the estate’s adjusted value. The special use value election on that tract dropped its value reported on the estate tax return to $227,233.00.  On audit, the IRS denied the election because the land subject to the election did not exceed 25 percent of the adjusted value of the gross estate. 

The IRS position.  The position of the IRS in Finfrock was that not only must the estate satisfy the 25 percent test to be eligible to make a special use valuation election, the election must be made applicable to at least 25 percent of the value of farmland that is included in the estate (using fair market value figures). 

As noted, the Treasury Regulation at issue in Finfrock had previously been invalidated in 1988 by the same court. Miller v. United States, 680 F. Supp. 1269 (C.D. Ill. 1988).  In Miller, the court held Treas. Reg. §20.2032A-8(a)(2) invalid insofar as it attempted to impose a non-statutory requirement that 25 percent of the adjusted value of the gross estate must consist of farmland subject to the special use valuation election.  The court determined that the regulation was not simply interpretative of the statute, but was legislative in nature because it imposed a requirement that the statute did not contain.  So, the regulation was invalid to the extent it went beyond merely procedural matters (e.g., the proper form to file or information to include on prescribed forms).

After Miller, it was believed that the IRS no longer enforced the regulation against estates.  Obviously, that wasn’t the case in Finfrock, where the IRS again asserted the application of the regulation.  The estate pointed to the 1988 Miller decision, arguing that the statute was clear and unambiguous in that the 25 percent requirement only meant that 25 percent of the adjusted value of the gross estate had to be comprised of farmland.  It did not mean that the election must also be on at least 25 percent of the farmland in the estate.  The IRS argued that the statute was silent on the matter, and that the regulation merely clarified the statutory ambiguity.  But, the court disagreed, noting that the statute’s plain language did not require that the property constituting 25 percent or more of the adjusted value of the gross estate also be subject to the election.  The court held that the statute unambiguously allows an executor to make the election on land comprising less than 25 percent of the adjusted value of the gross estate, and that the regulation impermissibly imposed a requirement in addition to the statute’s plain meaning.  Because the statute was neither silent nor ambiguous, the issue of whether the regulation was a reasonable interpretation of the statute was not in issue. 

Planning Implications

Finfrock reasserts the point that any attempt by the Treasury to limit the scope of a special use valuation election beyond the statute is impermissible.  That’s a key point, particularly when the issue involves the amount of land that must be subjected to a special use value election.   When an election is made, an amount equal to the adjusted tax difference becomes a lien in favor of the United States. I.R.C. §6324B(a). The lien applies “on the property in which such interest exists.”  The lien arises at the time the election is filed and continues until liability for the tax ceases, or the recapture tax has been paid.  I.R.C. §6324B(b).   

The ability to limit the amount of property subject to the lien allows for tailoring of the special use valuation election.  Such tailoring can aid in minimizing the potential for recapture tax being triggered during the ten-year period following the date of the decedent’s death by restricting the election to the land most likely to be continued in farm use during the recapture period.

Conclusion

The present concerns about a potential reduction in the amount that can be excluded from federal estate tax is real in the agricultural sector.  That concern is separate from that over a possible change in the income tax basis rule for property included in a decedent’s estate at death.  Consequently, it may be time to “dust off” the special use valuation provisions and refamiliarize ourselves with its detailed rules.  The 25 percent test is an important one of those.

March 31, 2021 in Estate Planning | Permalink | Comments (0)

Monday, March 29, 2021

Damaged and/or Destroyed Trees and Crops – How is the Loss Measured?

Overview

Sometimes a farmer, rancher or other rural landowner experiences damages to trees as a result of someone else’s conduct.  Maybe the damage occurs from aerial spry drift or excess (and wrongful) water drainage from an adjacent tract, or from some other occurrence.  The trees could be a producing orchard; or a windbreak designed to minimize soil loss and protect buildings; or ornamental trees and bushes providing an aesthetic benefit.  Often, trees are planted to become mature trees with an eye toward materially benefitting the property – whether monetarily or not.  

No matter whether the damage was intentional or a result of negligence, the computation of the amount of damages the landowner is entitled to can be difficult to determine. 

Computing tree damage - it’s the topic of today’s post. 

Negligence – Determining Liability

The negligence concept is the great workhorse of tort law.  More than 90 percent of all civil liability problems are those relating to negligence.  The negligence system is designed to provide compensation to those who suffer personal injury or property damage.  The negligence system is a fault-based system.  The vast majority of situations involving damage to trees are the result of negligent conduct with liability determined under the negligence, fault-based approach

For a person to be deemed legally negligent, certain conditions must exist. These conditions can be thought of as links in a chain. Each condition must be present before a finding of negligence can be obtained.  The first condition is that of a legal duty giving rise to a standard of care.  To be liable for a negligent tort, the defendant's conduct must have fallen below that of a “reasonable and prudent person” under the circumstances.  If a legal duty exists, it is necessary to determine whether the defendant's conduct fell short of the conduct of a “reasonable and prudent person (or professional) under the circumstances.”  This is called a breach, and it is the second element of a negligent tort case.  Once a legal duty and breach of that duty are shown to exist, a causal connection (the third element) must be established between the defendant's act and (the fourth element) the plaintiff's injuries (whether to person or property.  In other words, the resulting harm to the plaintiff must have been a reasonably foreseeable result of the defendant's conduct at the time the conduct occurred. Reasonable foreseeability is the essence of causality (also known as proximate cause).

Computing Damages

The fourth element of a tort claim, damages, when occurring to an annual crop (such as corn, soybeans and wheat, for example), are pegged by the lost value of the crop pegs.  That’s the starting point for determining the amount that can be recovered.  Of course, the party suffering the loss must establish the extent of the monetary damage, often by market data or by establishing the existence of a contract that specified the amount to be received on harvest and sale, discounted for risk of loss due to weather and/or insects. 

But, when the damage occurs to a plant, such as a tree, there is an additional component to the damage calculation – restoration.  Restoration involves calculating the cost of returning the disaffected landowner’s property to its condition before the damage occurred.  Sometimes courts compute the restorative cost as the difference in the value of the land before and after the damage.  But, the cases also demonstrate that the computation is not easy. See, e.g., B. & B. Farms, Inc. v. Matlock’s Fruit Farms, Inc., 73 Wash. 2d 146, 437 P.2d 178 (1968); Reeder Flying Service v. Crompton, 470 P.2d 281(Wyo. 1970).  The courts use various measures to assess the loss, but the goal is to provide adequate compensation so that the injured party is restored as closely as possible to pre-damage status.

Note:  A lawsuit to recover damages to trees (as well as crops), under the common law, is considered to be an action to recover for injuries to real estate.  Thus, the lawsuit is to be filed in the county where the trees are/were standing. 

For trees and vines that produce nuts and fruits, the measure of damages is generally the difference in land value immediately before and after the damage or destruction.  See, e.g., Rowe v. Chicago & North Western Railway Co., 102 Iowa 286 (1897); Collins v. Morris, 97 Kan. 264 (1916).  But, it might also be possible for the plaintiff to recover the value of the crop before the damage occurred.  So, the plaintiff should provide evidence of the cost of harvesting and marketing the crop in addition to the value of the crop itself.  Damages are a net computation.  See, e.g., Peterson v. Hager, 714 F.2d 1035 (10th Cir. 1983)But, one court has held that damages to a fruit crop itself could not be awarded because the value of the fruit-producing trees was an element of the damages.  If the value of the crop were to be included in the damage calculation, the court reasoned, the result would be double damages.  Hill v. Morrison, 88 Cal. App. 405, 263 P. 573 (1928). 

Recent Case

A Kansas case last year illustrates how courts handle claims involving alleged damages to trees.  In Ringneck Farms, LLC v. Steuwe, 471 P.3d 33 (Kan. Ct. App. 2020), the plaintiff owned a ranch used for commercial hunting purposes that was adjacent to the defendant’s property. The ranch had a row of hedge trees approximately 20 yards wide and 300 yards long adjacent to the defendant’s property. The hedge trees were mature trees. The defendant’s tenant contacted the plaintiff requesting permission to cut down the hedgerow and install a fence. The plaintiff told the tenant to not cut down the trees or disturb the vegetation. However, the tenant proceeded to cut down the hedgerow and installed the fence. In the process about 156 mature trees were destroyed. The plaintiff sued alleging negligence, conversion and trespass claiming that that the loss of the trees decreased the value of the property for hunting purposes. The defendant filed a motion in limine seeking to bar the plaintiff from presenting evidence about the trees’ replacement value, claiming that Kansas law did not recognize replacement value as a proper measure of damages for tree destruction. The defendant specifically referred to the plaintiff’s two experts, arborists that were prepared to testify that the replacement cost of the trees was $1,092,361.

The trial court granted the defendant’s motion. The defendant then moved for summary judgment, claiming that the trial court’s grant of the motion in limine established that the plaintiff could not establish that damages existed and, thus, had no claim. The trial court granted the summary judgment motion on the negligence issue, finding that the plaintiff did not know the market value of the ranch before and after the trees were removed and, thus, could not prove damages. In its response to the summary judgment motion, the plaintiff claimed that the ranch was damaged by virtue of the tree removal reducing the quality of hunting on the ranch. However, the trial court viewed this assertion did not convert any of the defendant’s statement of facts.

On appeal, the issue was whether the plaintiff had presented sufficient evidence of damages to present its case to a jury. The appellate court first determined that the plaintiff had not abandoned its claims for conversion and trespass because the defendant didn’t specifically address the conversion and trespass claims in the defendant’s trial court motions focusing solely on negligence. The appellate court also determined that the trial court did not err in granting the defendant’s motion in limine. The appellate court noted that damages had to be calculated in a reasonable manner, citing the fact that replacement cost of the trees with mature trees would exceed three times the value of the ranch. Thus, it was proper for the trial court to exclude the plaintiff’s proposed evidence on replacement cost of the hedgerow with mature trees.

On review of the grant of summary judgment on the negligence claims, the appellate court noted that the general rule that the measure of damages for negligent destruction of trees is the difference in market value of the land immediately before and after the damage. However, the appellate court noted that this rule is flexible, and the parties may present evidence supporting alternative measures of damages – trees having value independent of the land; loss of income from fruit trees; sentimental value of a tree, etc.  See, e.g., Evenson v. Lilley, 295 Kan. 43, 282 P.3d 610 (2012). On this point, the appellate court concluded that the plaintiff had submitted sufficient evidence of damages to overcome the defendant’s summary judgment motion. The appellate court noted that the plaintiff had provided sufficient evidence to overcome the motion by showing that the removal of the trees impacted the quality of hunting on the ranch which justified reasonable replacement costs as a measure of damages. The appellate court also determined that the plaintiff had provided sufficient evidence of damages on the conversion and trespass claims. The case was remanded to the trial court for further proceedings. 

Conclusion

When tree damage occurs on a farm, ranch or rural property the computation of damages is a key focus.  The damage calculation can differ based on whether the trees are income producing, soil preservation, or simply provide aesthetic beauty.  However, in general, the courts try to make the damaged party whole by returning them to the place they were in before the damage occurred.  Preserving evidence and substantiating the loss is key to recovery.

March 29, 2021 in Civil Liabilities | Permalink | Comments (0)

Friday, March 26, 2021

C Corporation Compensation Issues

Overview

A “hot-button” audit issue for S corporations involves the issue of “reasonable compensation” for shareholders.  Compensation is also an important issue in the C corporate context.  While in the S corporate context the temptation is to set compensation too low, the concern is just the opposite when a C corporation is involved. 

But, what is “reasonable compensation”?  Why does it matter?

Compensation issues in the C corporation context – it’s the topic of today’s post.

The Basic Problem

A corporate-level deduction is allowed for “reasonable” salaries and compensation paid to employees for their personal services.  Because of the dual-level taxation associated with C corporations (on corporate income when earned and again when paid as dividends) C corporations have an incentive to pay larger than normal salaries so as to reduce their taxable income and get corporate earnings to owners with only one level of tax.  But, the IRS can challenge what it deems to be “excessive” salaries as disguised dividends resulting in a loss of a corporate deduction from taxable income and the addition of the “excessive” amount to the corporation’s net taxable income.  Conversely, in certain situations, corporate employees may receive only a nominal salary in an attempt to minimize FICA and Medicare taxes.  Upon audit, IRS may increase the salary with the result that FICA and Medicare tax will be due, plus interest and penalties.  Another problem associated with setting salaries too low is that the corporation could be assessed for payroll taxes on the unreported compensation.  The penalties and interest associated with unreported compensation are often greater than an income tax deficiency assessment.  The quarterly payroll deposit rules will typically have been violated, resulting in cascading penalties that include the failure to timely deposit and failure to properly report.

What is a “Reasonable” Salary?

Corporate salaries must be “reasonable” in light of the personal services that are actually rendered.  I.R.C. §162(a)(1).  However, “reasonable” is not defined in the Code, and the Regulations provide only that “reasonable compensation is an amount paid for like service by like enterprises under like circumstances.” Treas. Regs. §§1.162-7(b)(3) and 1.1366-3(a). Thus, the facts and circumstances of each particular situation are determinative of the outcome.  The courts, in numerous cases involving the issue, have set forth several factors to be used in determining the reasonableness of salaries, including.  Likewise the IRS Audit Manual utilizes the same factors. 

The factors are as follows: 

  • The level of the salary in light of the employee’s qualifications
  • The compensation paid in light of the nature and extent of the employee’s work, with consideration paid to the role that the shareholder plays in the corporation (e.g., the employee’s position, number of hours worked and duties performed)
  • How the compensation compares to compensation paid for similar services by similar entities
  • Whether the compensation is reasonable in relation to the salary history of the corporation
  • Whether the compensation is reasonable in light of the character and financial condition of the corporation
  • Whether a hypothetical, independent investor would conclude that there is an adequate return on investment after considering the shareholder’s compensation
  • The size and complexity of the business
  • How the amount of salaries paid compares to corporate sales and net income
  • General economic conditions
  • How the amount of salaries compare to shareholder distributions and retained earnings
  • The corporation’s dividend history
  • Whether the employee and employer dealt at arm’s length
  • Whether the employee guaranteed the employer’s debt
  • Whether there has been a “catch-up” element involved where the corporation is making up for years when the employee was under paid
  • Whether the corporation has developed compensation policy for employees allowing them to participate in the company’s success

The cases confirm that no single factor controls.  Instead, a combination of the factors must be considered.  In addition, the factors are not all inclusive and may not be given equal weight.  Fewer or additional factors may be appropriate, depending on the surrounding facts and circumstances.

What’s “reasonable compensation” for an owner of a closely-held farming or ranching operation?  The answer to that question depends on how the factors listed above apply to the facts and circumstances of the particular situation. 

Tax Planning Strategy

As a tax planning strategy, before year-end, each shareholder/employee’s compensation should be reviewed for reasonableness and increased by payment of a year-end bonus if needed.  While reasonableness is based on the facts and circumstances, compensation can often be set at the low end of a wide salary range that is both reasonable and supportable.  The better the documentation explaining why wages and bonuses are appropriate, the more likely that the payments can withstand IRS attack.

Consider the following example:

Joe starts up an accounting practice, and employs Blake and Terry.  Joe operates as a personal service corporation.  The firm has a successful first year, generating an extra $300,000 in corporate net income.  Joe declares a bonus for himself in the amount of $300,000, which eliminates the corporation’s taxable income.  However, $200,000 of the $300,000 in additional income was generated by the efforts of Blake and Terry. Joe actually spent a couple of months of the year taking a sabbatical in the north woods of Minnesota playing his ukulele for the animals that would listen and giving a break to Blake and Terry from his dry humor. Joe claimed he continued to “manage’ the practice from his remote location.

The IRS would likely take the position that the extra time and effort expended by Joe in managing the accounting practice is, at best, a nominal factor to be taken into account when a large portion of the income is based on the services rendered by other employees.  So, IRS would likely conclude that $200,000 of net income paid to Joe is actually a non-deductible dividend to Joe.  The resulting additional corporate income is taxed at the 21 percent rate applicable to personal service corporations.  The result would be an added tax liability of $42,000. 

Joe could elect to have the company taxed as an S corporation.  Joe would then refrain from declaring and paying the $300,000 bonus to himself, instead picking it up as an S corporation distribution which is taxed to the shareholders on a pro rata basis.  But, if Joe does this, IRS could examine the $300,000 paid as an S corporation distribution to determine whether it actually should be treated as compensation to Joe.  If all or a portion of the $300,000 is deemed to be compensation, Social Security and Medicare tax will be assessed on the amount deemed to be compensation.  Also, with an S election, if Joe were to set his compensation at the amount of the maximum for qualified retirement plan funding, with the balance of corporate net income structured as an S corporation distribution, that would avoid Medicare tax on the amount of the S corporation distribution.  IRS, however, would likely examine that scenario to determine whether the compensation amount is too low.

Prominent Case

There have been numerous prominent cases on the issue of reasonable compensation.  A particularly high-profile one involved the founder and CEO of Menards, a chain of “home improvement” stores located in the Midwest.

In Menard, Inc. v. Commissioner, 560 F.3d 620 (7th Cir. 2009), the IRS challenged the $20 million salary of a corporate CEO (who was also a shareholder/employee that worked full time and owned all of the voting stock and 56 percent of the non-voting stock) as unreasonable. The compensation plan for the CEO included a base salary, a profit-sharing plan and a bonus plan that had been in place since 1973.  Over $17 million of the total amount was paid in accordance with a bonus plan that had been in place since 1973.   The bonus was tied to 5 percent of the corporation’s net income before taxes.  The Tax Court disallowed all but $7 million of the salary (after comparisons to CEO salaries of competing businesses – Home Depot and Lowe’s) determining it to be a disguised dividend.  On further review, the appellate court reversed.  The appellate court determined that, the under the CEO’s management, corporate revenues grew from $788 million in 1991 to $3.4 billion in 1998 (the year at issue) and the corporation’s taxable income grew from $59 million to $315 million during the same timeframe.  The corporation’s rate of return on shareholder’s equity in 1998 was higher than that of either company the Tax Court used for comparison purposes.  The appellate court noted that the CEO handled a large part of the duties which were normally delegated in other companies to subordinates.  In addition, the fact that there was no independent Board of Directors for the corporation required the CEO to accept greater responsibility and duties that normally don’t apply to comparable CEOs.  Thus, to the appellate court, the 5 percent of net corporate income did not look at all like a dividend and the appellate court held that the Tax Court committed clear error in holding that the salary was excessive.  That was particularly the case, the court noted because the compensation that the Tax Court determined to be a disguised dividend was paid before a determination of the corporation’s net income for the year, and was paid on an annual basis.  That meant that it was not a set dollar amount that constituted a dividend.   

The appellate court was also highly skeptical of the Tax Court’s remark that the owner of a business has no need for incentive compensation because ownership is incentive enough. The appellate court reasoned that owners should not be treated differently from other managers and also stated that the Tax Court had established itself as the “super-personnel department for closely-held corporations.” 

Recent Case

In Aspro, Inc. v. Comr., T.C. Memo. 2021-8, the petitioner was a C corporation in the asphalt paving business incorporated under Iowa law with its principal place of business in Iowa.  The petitioner had three shareholders and did not declare or distribute any dividends to them during the tax years in issue (2012-2014) or in any prior year.  This was despite the petitioner having significant profits before setting management fees.  Thus, the shareholders didn’t receive any return on their equity investment.  The petitioner did not enter into any written management or consulting services agreements with any of its shareholders. Also, there was no management fee rate or billing structure negotiated or agreed to between the shareholders and petitioner at the beginning of any of the years in issue.  In addition, none of the shareholders invoiced or billed the petitioner for any services provided indirectly via other legal entities that the shareholders controlled. Instead, the petitioner’s board of directors would approve the management fees to be paid to the shareholders at a board meeting later in the tax year, when the board had a better idea how the company was going to perform and how much earnings the company should retain.  But, the board minutes did not reflect how the determinations were made.  The petitioner’s board did not attempt to value or quantify any of the services performed on its behalf and simply approved a lump-sum management fee for each shareholder for each year. The amounts were not determined after considering the services performed and their values. There was no correlation between management fees paid and services rendered. In total, the shareholders received management fees exceeding $1 million every year for the years in issue. The management fees were simply paid after-the-fact in an attempt to zero-out the petitioner’s taxable income.

The IRS completely denied the petitioner’s claimed deductions for management fees and amounts the petitioner claimed for the domestic production activities deduction for the years in issue.  The Tax Court upheld the IRS position denying the deduction.  The Tax Court determined that the petitioner failed to prove that the management fees were neither ordinary and necessary business expenses or reasonable in accordance with Treas. Reg. §1.162-7.  Based on the facts and circumstances, the Tax Court concluded that the absence of the dividend payments where the petitioner had available profits created an inference that at least some of the compensation represented a distribution with respect to corporate stock.  While the management fees loosely corresponded to each shareholder’s percentage interest, the Tax Court inferred that the shareholders were receiving disguised distributions based on each shareholder’s equity interest. 

As for the services rendered to the petitioner via the shareholders’ controlled entities, the Tax Court noted that if the services were to be compensated, the petitioner should have invoiced directly for the services.  The services, as a result, did not provide even indirect support for the management fees the petitioner paid to its shareholders.  The Tax Court also noted that the management fees were not set in advance for services to be provided and there was no management agreement that supported any objective pricing that the parties bargained for.  The shareholders also could not explain how the management fees were determined, and the corporate president (and one of petitioner’s board members) displayed a misunderstanding of the nature of deductible management fees and stock distributions.  The Tax Court also noted that the effect of the deduction for management fees was to create little taxable income to the petitioner, indicating that the fees were disguised distributions.  The Tax Court further determined that the petitioner’s president rendered no services to the petitioner other than being the president and, as such was already overcompensated by his base salary and annual bonus totaling approximately $500,000 annually.  Thus, the additional management fee was completely unreasonable as to him.  

Conclusion

Paying “reasonable compensation” in the context of closely-held corporations is critical. 

March 26, 2021 in Business Planning, Income Tax | Permalink | Comments (0)

Wednesday, March 24, 2021

Court and IRS Happenings in Ag Law and Tax

Overview

It’s been a while since I have written a summary of what’s been happening in the courts concerning developments relevant to agricultural producers, ag businesses and rural landowners.  It’s always helpful to stay informed of the ag legal issues that the courts are addressing. 

Current court developments in the courts involving ag law and tax – it’s the topic of today’s post.

Nuisance Case Against Hog CAFO Continues 

Barden v. Murphy-Brown, LLC, No. 7:20-CV-85-BR, 2021 U.S. Dist. LEXIS 47809 (E.D. N.C. Mar. 15, 2021)  

The plaintiff sued the defendant for trespass, negligence, civil conspiracy and unjust enrichment arising from odor, dust, feces, urine and flies from a neighboring hog facility that housed 20,000-head of the defendant’s hogs.  The plaintiff sought compensatory and punitive damages.  The defendant sought to dismiss the complaint for failure to join to the lawsuit the farmer that operated the hog facility via a contact with the defendant as an indispensable party.  The court disagreed as the farmer’s conduct was likely irrelevant to the outcome of the litigation and any impact that an adverse judgment against the defendant might have on the farmer’s interests at the farm was speculative.

The defendant also sought dismissal on the basis that the plaintiff’s complaint failed to state a claim for relief that was other than speculative.  The defendant cited the state (NC) right-to-farm (RTF) law as barring all of the plaintiff’s claims.  However, the court disagreed noting that conditions that constitute a nuisance can also constitute a trespass (and other causes of action).  Thus, the plaintiff’s complaint was not restricted to allegations of a nuisance cause of action which the RTF law would bar.  The court noted that the NC RTF law was different from other state RTF laws that covered non-nuisance tort claims related to farming operations along with nuisance claims.  The NC RTF law only covered nuisance-related claims and had no application to non-nuisance claims. 

As to whether the plaintiff adequately alleged the non-nuisance claims, the court concluded that the plaintiff sufficiently alleged, at a minimum, a claim for unintentional trespass by not consenting to dust, urine and fecal matter from entering its property.  On the plaintiff’s negligence claim, the court determined that it was reasonably foreseeable that if the defendant did not act reasonably in managing the facility that dust and animal waste would be present on the plaintiff’s property.  As such, the defendant owed the plaintiff a duty and there was a causal link with any potential breach of that duty.  Thus, the plaintiff properly stated a claim for negligence.  The plaintiff also alleged that the defendant conspired with its corporate parent to mislead the public about the science of hog manure removal and various constitutional violations.  The court rejected this claim because any conspiracy was between the defendant and its corporate parent and not with any independent party.  The plaintiff also claimed that the defendant unjustly enriched itself by using the plaintiff’s property for a de facto easement without paying for it.  The court rejected the claim because the plaintiff had conferred no benefit on the plaintiff which gave rise to any legal or equitable obligation on the defendant’s part to account for the benefit received.  However, the court refused to strike the plaintiff’s allegations relating to the defendant’s Chinese ownership, influence and exploitation as well as the defendant’s financial resources.  The court determined that such allegations had a bearing on the defendant’s motivation, extent of harm and ability to implement alternative technology. 

1914 Fence Agreement Fixes Boundary 

Eggemeyer v. Hughes, No. 08-19-0002-CV, 2021 Tex. App. LEXIS 691 (Tex. Ct. App. Jan. 28, 2021)  

 The parties owned adjacent tracts of land north and south of each other separated by section lines.  The defendant claimed that the section lines delineated the boundary and that a barbed wire fence constructed from a survey was built in its location due to practicalities.  The plaintiff claimed that the fence, which existed 150 yards to the north of the section lines, was the boundary.  The disputed acreage between the section lines and the fence was 90 acres. 

In 1914, prior owners of the tracts had executed a fence agreement that was filed in the county register of deeds office.  In the agreement they fixed the boundary in accordance with a metes and bounds description that referred to natural landmarks.  The plaintiff’s deed referred to the 1914 agreement.  In 2013, the plaintiffs sought to place a water well close to the boundary and negotiations with the defendant revealed that the parties had different views of the actual boundary.  The defendants sought a declaratory judgment seeking to enforce the 1914 agreement and the plaintiffs filed an adverse possession claim.  The trial court upheld the 1914 fence agreement and dismissed the plaintiff’s claims. 

On further review the appellate court affirmed.  While the non-permanent markers referred to in the 1914 fence agreement could not be found, the appellate court determined that there was sufficient evidence to support the defendant’s claim of ownership of the disputed acres via the 1914 fence agreement.  The appellate court also remanded the case on the issue of attorney fees. 

Boundary by Acquiescence Established by Landowners’ Conduct

Waggoner v. Alford, No. CV-19-931, 2021 Ark. App. 120 (Ark. Ct. App. Mar. 10, 2021)

The defendants purchased land adjacent to the plaintiff’s property on which they built a house. The defendants had a survey completed which indicated that their house was twenty-seven feet from the property line. This initial survey treated the plaintiff’s wire fence as the boundary. The plaintiff commissioned a survey nine years later that revealed that the fence was not the true boundary, and the defendants’ house encroached thirty-three feet onto the plaintiff’s property. A subsequent survey by the defendants made the same finding. The plaintiff sued to eject the defendants from the disputed .828-acre tract. The defendants claimed that the plaintiff’s fence constituted a boundary by acquiescence. The plaintiff argued that the fence was never intended to act as a boundary line, but rather as a means for keeping his horses on his property for a period of two to three years.

The trial court determined that the defendants had proved title to the disputed .828-acre tract. On appeal, the plaintiff argued that a boundary by acquiescence had not been established. Specifically, the plaintiff argued that the parties had not mutually consented to the fence as the property line. The appellate court noted that an express agreement between the parties is not necessary, and silent acquiescence can be established when a boundary line can be inferred from the conduct of the parties over a period of time. The appellate court noted that the defendants had maintained the disputed property for eight years before the plaintiff objected. As a result, the appellate court held that the evidence supported the finding of a boundary by acquiescence.

Trump-Era WOTUS Rule Applies in All States

Colorado v. United States Environmental Protection Agency, No. 20-1238, 2021 U.S. App. LEXIS 6070 (10th Cir. Mar. 2, 2021)

The “Navigable Waters Protection Rule” (NWPR) issued in April 2020, defines the Clean Water Act (“CWA”) term “waters of the United States” (“WOTUS”). The definition is a key aspect of administering the CWA.  Only waters that constitute a WOTUS are subject to the CWA requirements and regulations.  However, the Congress left the definition of a WOTUS up to the Environmental Protection Agency (EPA) to write rules defining the term. The NWPR is the most recent attempt at a regulatory definition.  

In 2020, the Colorado federal district court entered a preliminary injunction that barred the NWPR from taking effect in Colorado as applied to the discharge permit requirement of Section 404 of the CWA.  On appeal, the appellate court reversed.  The appellate court noted that Colorado had failed to show irreparable harm without the issuance of the preliminary injunction.  The result of the appellate court’s decision is that the NWPR is presently in effect in every state in the U.S. 

CWA Contains “Knowing” Requirement, But WOTUS is Not Vague 

United States v. Lucero, No. 10074, 2021 U.S. App. LEXIS 6307 and 6327 (9th Cir. Mar. 4, 2021)

The defendant, in 2014, operated a business that charged construction companies for the dumping of soil and debris on dry lands near San Francisco bay.  The Environmental Protection Agency (EPA) later claimed that the dry land was a “wetland” subject to the dredge and fill permit requirements of Section 404 of the Clean Water Act (CWA).  As a result, the defendant was charged with (and later convicted of) violating the CWA without any evidence in the record that the defendant knew or had reason to know that the dry land was a wetland subject to the CWA. 

On further review, the appellate court noted that the CWA prohibits the “knowing” discharge of a pollutant into covered waters without a permit.  At trial, the jury instructions did not state that the defendant had to make a “knowing” violation of the CWA to be found guilty of a discharge violation.  Accordingly, the appellate court reversed on this point.  However, the appellate court ruled against the defendant on his claim that the regulation defining “waters of the United States” was unconstitutionally vague, and that the 2020 Navigable Waters Protection Rule should apply retroactively to his case. 

Conservation Easement Deduction Allowed for Donated Façade Easement 

C.C.M. AM 2021-001 (Mar. 8, 2021)

The taxpayer donated an easement on a building in a registered historic district on which the taxpayer had installed an accessibility ramp to comply with the Americans With Disabilities Act (ADA).  The IRS determined that the installation of the ramp would not disqualify the taxpayer’s deduction.  The IRS viewer the ramp as “upkeep” essential to the preservation of the structure.  Such upkeep, if required to comply with the ADA, does not jeopardize the donor’s eligibility for a charitable deduction under I.R.C. §170(h)(4)(B) with respect to a building in a registered historic district. 

No Exception From Early Withdrawal Penalty for Payment of Living Expenses 

Catania v. Comr., T.C. Memo. 2021-33

The petitioner retired at age 55 and transferred his 401(k) funds to a traditional IRA.  Two years later, the petitioner withdrew $37,000 from the IRA to pay for maintenance on his home and other living expenses.  The IRS applied a 10 percent penalty to the amount withdrawn because the petitioner had not reached age 59.5 at the time of the withdrawal.  The Tax Court agreed with the IRS, determining that the Code contains no exception to early retirement account withdrawals for payment of living expenses and/or home maintenance. 

Conclusion

These are just some of the recent developments in the ag law and tax world.  There’s never a dull moment.

March 24, 2021 in Environmental Law, Income Tax, Real Property | Permalink | Comments (0)

Sunday, March 21, 2021

Ag Law and Taxation - 2018 Bibliography

Overview

Today's post is a bibliography of my ag law and tax blog articles of 2018.  Many of you have requested that I provide something like this to make it easier to find the articles, and last month I posted the bibliography of the 2020 and 2019 articles.  Soon I will post the bibliography of the 2017 articles and then 2016.  After those are posted.  I will post one long bibliography containing all of the articles up to that point in time.  Then, to close out 2021, I will post the articles of 2021. 

The library of content is piling up.

Cataloging the 2018 ag law and tax blog articles - it's the topic of today's post.

BANKRUPTCY

Top Ten Agricultural Law and Tax Developments of 2017 (Ten through Six)

https://lawprofessors.typepad.com/agriculturallaw/2018/01/top-ten-agricultural-law-and-tax-developments-of-2017-ten-through-six.html

Chapter 12 Bankruptcy – Feasibility of the Reorganization Plan

https://lawprofessors.typepad.com/agriculturallaw/2018/03/chapter-12-bankruptcy-feasibility-of-the-reorganization-plan.html

Farm Bankruptcy and the Preferential Payment Rule

https://lawprofessors.typepad.com/agriculturallaw/2018/05/farm-bankruptcy-and-the-preferential-payment-rule.html

Can a Bankrupt Farm Debtor Make Plan Payments Directly to Creditors?

https://lawprofessors.typepad.com/agriculturallaw/2018/08/can-a-bankrupt-farm-debtor-make-plan-payments-directly-to-creditors.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

Chapter 12 Bankruptcy and the Tools-of-the-Trade Exemption

https://lawprofessors.typepad.com/agriculturallaw/2018/11/chapter-12-bankruptcy-and-the-tools-of-the-trade-exemption.html

Developments in Ag Law and Tax

https://lawprofessors.typepad.com/agriculturallaw/2018/11/developments-in-ag-law-and-tax.html

The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html

BUSINESS PLANNING

The “Almost Top Ten” Agricultural Law and Tax Developments of 2017

https://lawprofessors.typepad.com/agriculturallaw/2018/01/the-almost-top-ten-agricultural-law-and-tax-developments-of-2017.html

The Spousal Qualified Joint Venture

https://lawprofessors.typepad.com/agriculturallaw/2018/02/the-spousal-qualified-joint-venture.html

The Spousal Qualified Joint Venture – Implications for Self-Employment Tax and Federal Farm Program Payment Limitations

https://lawprofessors.typepad.com/agriculturallaw/2018/02/the-spousal-qualified-joint-venture-implications-for-self-employment-tax-and-federal-farm-program-payment-limitations.html

Form a C Corporation – The New Vogue in Business Structure?

https://lawprofessors.typepad.com/agriculturallaw/2018/02/form-a-c-corporation-the-new-vogue-in-business-structure.html

Tax Issues When Forming a C Corporation

https://lawprofessors.typepad.com/agriculturallaw/2018/02/tax-issues-when-forming-a-c-corporation.html

End of Tax Preparation Season Means Tax Seminar Season is About to Begin

https://lawprofessors.typepad.com/agriculturallaw/2018/04/end-of-tax-preparation-season-means-tax-seminar-season-is-about-to-begin.html

Converting a C Corporation to an S Corporation – The Problem of Passive Income

https://lawprofessors.typepad.com/agriculturallaw/2018/05/converting-a-c-corporation-to-an-s-corporation-the-problem-of-passive-income.html

Valuation Discounting

              https://lawprofessors.typepad.com/agriculturallaw/2018/05/valuation-discounting.html

Valuation Discounting – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2018/05/valuation-discounting-part-two.html

The Impact of the TCJA on Estates and Trusts

https://lawprofessors.typepad.com/agriculturallaw/2018/05/the-impact-of-the-tcja-on-estates-and-trusts.html

Buy-Sell Agreements for Family Businesses

https://lawprofessors.typepad.com/agriculturallaw/2018/06/buy-sell-agreements-for-family-businesses.html

When is an Informal Business Arrangement a Partnership?

https://lawprofessors.typepad.com/agriculturallaw/2018/07/when-is-an-informal-business-arrangement-a-partnership.html

Management Activities and the Passive Loss Rules

https://lawprofessors.typepad.com/agriculturallaw/2018/07/management-activities-and-the-passive-loss-rules.html

Expense Method Depreciation and Trusts

https://lawprofessors.typepad.com/agriculturallaw/2018/08/expense-method-depreciation-and-trusts.html

Qualified Business Income Deduction – Proposed Regulations

  https://lawprofessors.typepad.com/agriculturallaw/2018/08/qualified-business-income-deduction-proposed-regulations.html

Intentionally Defective Grantor Trust – What is it and How Does it Work?

https://lawprofessors.typepad.com/agriculturallaw/2018/08/intentionally-defective-grantor-trust-what-is-it-and-how-does-it-work.html

When Can a Corporate Shareholder be Held Liable for Corporate Debts and Liabilities?

https://lawprofessors.typepad.com/agriculturallaw/2018/09/when-can-a-corporate-shareholder-be-held-liable-for-corporate-debts-and-liabilities.html

Farm Wealth Transfer and Business Succession – The GRAT

https://lawprofessors.typepad.com/agriculturallaw/2018/09/farm-wealth-transfer-and-business-succession-the-grat.html

Social Security Planning for Farmers

https://lawprofessors.typepad.com/agriculturallaw/2018/10/social-security-planning-for-farmers.html

Corporations Post-TCJA and Anti-Corporate Farming Laws

https://lawprofessors.typepad.com/agriculturallaw/2018/10/corporations-post-tcja-and-anti-corporate-farming-laws.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

What Happens When a Partner Dies?

https://lawprofessors.typepad.com/agriculturallaw/2018/10/what-happens-when-a-partner-dies.html

What are the Tax Consequences on Sale or Exchange of a Partnership Interest?

https://lawprofessors.typepad.com/agriculturallaw/2018/12/what-are-the-tax-consequences-on-sale-or-exchange-of-a-partnership-interest.html

The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html

CIVIL LIABILITIES

The “Almost Top Ten” Agricultural Law and Tax Developments of 2017

https://lawprofessors.typepad.com/agriculturallaw/2018/01/the-almost-top-ten-agricultural-law-and-tax-developments-of-2017.html

Landlord Liability for Injuries Occurring on Leased Premises

https://lawprofessors.typepad.com/agriculturallaw/2018/03/landlord-liability-for-injuries-occurring-on-leased-premises.html

When Does a Rule of Strict Liability Apply on the Farm?

https://lawprofessors.typepad.com/agriculturallaw/2018/03/when-does-a-rule-of-strict-liability-apply-on-the-farm.html

When Can I Shoot My Neighbor’s Dog?

https://lawprofessors.typepad.com/agriculturallaw/2018/05/when-can-i-shoot-my-neighbors-dog.html

Reasonable Foreseeability

https://lawprofessors.typepad.com/agriculturallaw/2018/05/reasonable-foreseeability.html

What is “Agriculture” for Purposes of Agritourism?

https://lawprofessors.typepad.com/agriculturallaw/2018/05/what-is-agriculture-for-purposes-of-agritourism.html

Negligence – Can You Prove Liability?

https://lawprofessors.typepad.com/agriculturallaw/2018/06/negligence-can-you-prove-liability.html

Wind Farm Nuisance Matter Resolved – Buy the Homeowners Out!

https://lawprofessors.typepad.com/agriculturallaw/2018/06/wind-farm-nuisance-matter-resolved-buy-the-homeowners-out.html

Torts Down on the Farm

            https://lawprofessors.typepad.com/agriculturallaw/2018/08/torts-down-on-the-farm.html

Roadkill – It’s What’s for Dinner

https://lawprofessors.typepad.com/agriculturallaw/2018/09/roadkill-its-whats-for-dinner.html

What Difference Does it Make if I Post My Property “No Trespassing”?

https://lawprofessors.typepad.com/agriculturallaw/2018/09/what-difference-does-it-make-if-i-post-my-property-no-trespassing.html

Liability for Injuries Associated with Horses

https://lawprofessors.typepad.com/agriculturallaw/2018/10/liability-for-injuries-associated-with-horses.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

Developments in Ag Law and Tax

https://lawprofessors.typepad.com/agriculturallaw/2018/11/developments-in-ag-law-and-tax.html

The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html

CONTRACTS

Is a Farmer a Merchant?  Why it Might Matter

https://lawprofessors.typepad.com/agriculturallaw/2018/02/is-a-farmer-a-merchant-why-it-might-matter.html

Some Thoughts on the Importance of Leasing Farmland

https://lawprofessors.typepad.com/agriculturallaw/2018/02/some-thoughts-on-the-importance-of-leasing-farmland.html

Contract Rescission – When Can You Back Out of a Deal?

https://lawprofessors.typepad.com/agriculturallaw/2018/06/contract-rescission-when-can-you-back-out-of-a-deal.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

Disclaiming Implied Warranties

https://lawprofessors.typepad.com/agriculturallaw/2018/11/disclaiming-implied-warranties.html

The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html

COOPERATIVES

The Qualified Business Income (QBI) Deduction – What a Mess!

https://lawprofessors.typepad.com/agriculturallaw/2018/01/the-qualified-business-income-qbi-deduction-what-a-mess.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html

CRIMINAL LIABILITIES

Curtilage – How Much Ag Property is Protected from a Warrantless Search?

https://lawprofessors.typepad.com/agriculturallaw/2018/01/curtilage-how-much-ag-property-is-protected-from-a-warrantless-search.html

Establishing the Elements of a Cruelty to Animals Charge

https://lawprofessors.typepad.com/agriculturallaw/2018/07/establishing-the-elements-of-a-cruelty-to-animals-charge.html

What Difference Does it Make if I Post My Property “No Trespassing”?

https://lawprofessors.typepad.com/agriculturallaw/2018/09/what-difference-does-it-make-if-i-post-my-property-no-trespassing.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html

ENVIRONMENTAL LAW

The “Almost Top Ten” Agricultural Law and Tax Developments of 2017

https://lawprofessors.typepad.com/agriculturallaw/2018/01/the-almost-top-ten-agricultural-law-and-tax-developments-of-2017.html

Top Ten Agricultural Law and Tax Developments of 2017 (Five through One)

https://lawprofessors.typepad.com/agriculturallaw/2018/01/top-ten-agricultural-law-and-tax-developments-of-2017-five-through-one.html

Is a CWA Permit Needed for Pollution Discharges via Groundwater?

https://lawprofessors.typepad.com/agriculturallaw/2018/03/is-a-cwa-permit-needed-for-pollution-discharges-via-groundwater.html

Non-Tax Ag Provisions and the Omnibus Bill

https://lawprofessors.typepad.com/agriculturallaw/2018/04/non-tax-ag-provisions-in-the-omnibus-bill.html

Wetlands and Farm Programs – Does NRCS Understand the Rules?

https://lawprofessors.typepad.com/agriculturallaw/2018/06/wetlands-and-farm-programs-does-nrcs-understand-the-rules.html

Regulation of Wetlands and “Ipse Dixit” Determinations

https://lawprofessors.typepad.com/agriculturallaw/2018/07/regulation-of-wetlands-and-ipse-dixit-determinations.html

WOTUS Developments

            https://lawprofessors.typepad.com/agriculturallaw/2018/08/wotus-developments.html

Does the Migratory Bird Treaty Act Apply to Farmers?

https://lawprofessors.typepad.com/agriculturallaw/2018/08/does-the-migratory-bird-treaty-act-apply-to-farmers.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

Is Groundwater a “Point Source” Pollutant?

https://lawprofessors.typepad.com/agriculturallaw/2018/10/is-groundwater-a-point-source-pollutant.html

“Waters of the United States” Means “Frozen Soil”?

https://lawprofessors.typepad.com/agriculturallaw/2018/11/waters-of-the-united-states-means-frozen-soil.html

Developments in Ag Law and Tax

https://lawprofessors.typepad.com/agriculturallaw/2018/11/developments-in-ag-law-and-tax.html

Can an Endangered Species be Protected in Areas Where it Can’t Survive?

https://lawprofessors.typepad.com/agriculturallaw/2018/12/can-an-endangered-species-be-protected-in-areas-where-it-cant-survive.html

The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html

ESTATE PLANNING

The “Almost Top Ten” Agricultural Law and Tax Developments of 2017

https://lawprofessors.typepad.com/agriculturallaw/2018/01/the-almost-top-ten-agricultural-law-and-tax-developments-of-2017.html

The Tax Cuts and Job Acts – How Does it Impact Estate Planning?

https://lawprofessors.typepad.com/agriculturallaw/2018/01/the-tax-cuts-and-jobs-act-how-does-it-impact-estate-planning.html

What’s the Charitable Deduction for Donations From a Trust?

https://lawprofessors.typepad.com/agriculturallaw/2018/01/whats-the-charitable-deduction-for-donations-from-a-trust.html

The Spousal Qualified Joint Venture

https://lawprofessors.typepad.com/agriculturallaw/2018/02/the-spousal-qualified-joint-venture.html

Why Clarity in Will/Trust Language Matters

https://lawprofessors.typepad.com/agriculturallaw/2018/02/why-clarity-in-willtrust-language-matters.html

Some Thoughts on the Importance of Leasing Farmland

https://lawprofessors.typepad.com/agriculturallaw/2018/02/some-thoughts-on-the-importance-of-leasing-farmland.html

End of Tax Preparation Season Means Tax Seminar Season is About to Begin

https://lawprofessors.typepad.com/agriculturallaw/2018/04/end-of-tax-preparation-season-means-tax-seminar-season-is-about-to-begin.html

Modifying an Irrevocable Trust – Decanting

https://lawprofessors.typepad.com/agriculturallaw/2018/04/modifying-an-irrevocable-trust-decanting.html

Valuation Discounting – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2018/05/valuation-discounting-part-two.html

The Impact of the TCJA on Estates and Trusts

https://lawprofessors.typepad.com/agriculturallaw/2018/05/the-impact-of-the-tcja-on-estates-and-trusts.html

Impact of Post-Death Events on Valuation

https://lawprofessors.typepad.com/agriculturallaw/2018/06/impact-of-post-death-events-on-valuation.html

Beneficiary Designations, Changed Circumstances and the Contracts Clause

https://lawprofessors.typepad.com/agriculturallaw/2018/07/beneficiary-designations-changed-circumstances-and-the-contracts-clause.html

Qualified Business Income Deduction – Proposed Regulations

https://lawprofessors.typepad.com/agriculturallaw/2018/08/qualified-business-income-deduction-proposed-regulations.html

Spousal Joint Tendencies and Income Tax Basis

https://lawprofessors.typepad.com/agriculturallaw/2018/09/spousal-joint-tenancies-and-income-tax-basis.html

Farm and Ranch Estate Planning in 2018 and Forward

https://lawprofessors.typepad.com/agriculturallaw/2018/10/farm-and-ranch-estate-planning-in-2018-and-forward.html

The TCJA, Charitable Giving and a Donor-Advised Fund

https://lawprofessors.typepad.com/agriculturallaw/2018/10/the-tcja-charitable-giving-and-a-donor-advised-fund.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

Unpaid Tax at Death – How Long Does IRS Have to Collect?

https://lawprofessors.typepad.com/agriculturallaw/2018/11/unpaid-tax-at-death-how-long-does-irs-have-to-collect.html

The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html

INCOME TAX

The “Almost Top Ten” Agricultural Law and Tax Developments of 2017

https://lawprofessors.typepad.com/agriculturallaw/2018/01/the-almost-top-ten-agricultural-law-and-tax-developments-of-2017.html

Top Ten Agricultural Law and Tax Developments of 2017 (Five through One)

https://lawprofessors.typepad.com/agriculturallaw/2018/01/top-ten-agricultural-law-and-tax-developments-of-2017-five-through-one.html

The Qualified Business Income (QBI) Deduction – What a Mess!

https://lawprofessors.typepad.com/agriculturallaw/2018/01/the-qualified-business-income-qbi-deduction-what-a-mess.html

The Tax Cuts and Jobs Act – How Does it Impact Estate Planning?

https://lawprofessors.typepad.com/agriculturallaw/2018/01/the-tax-cuts-and-jobs-act-how-does-it-impact-estate-planning.html

What’s the Charitable Deduction for Donations from a Trust?

https://lawprofessors.typepad.com/agriculturallaw/2018/01/whats-the-charitable-deduction-for-donations-from-a-trust.html

Can Farmers Currently Deduct Research Expenditures?

https://lawprofessors.typepad.com/agriculturallaw/2018/01/can-farmers-currently-deduct-research-expenditures.html

Innovation on the Farm – Will the Research and Development Credit Apply?

https://lawprofessors.typepad.com/agriculturallaw/2018/01/innovation-on-the-farm-will-the-research-and-development-credit-apply.html

What Happens When the IRS Deems an Ag Activity to Be a Hobby?

https://lawprofessors.typepad.com/agriculturallaw/2018/01/what-happens-when-the-irs-deems-an-ag-activity-to-be-a-hobby.html

The Spousal Qualified Joint Venture – Implications for Self-Employment Tax and Federal Farm Program Payment Limitations

https://lawprofessors.typepad.com/agriculturallaw/2018/02/the-spousal-qualified-joint-venture-implications-for-self-employment-tax-and-federal-farm-program-payment-limitations.html

Livestock Sold or Destroyed Because of Disease

https://lawprofessors.typepad.com/agriculturallaw/2018/02/livestock-sold-or-destroyed-because-of-disease.html

Form a C Corporation – The New Vogue in Business Structure?

https://lawprofessors.typepad.com/agriculturallaw/2018/02/form-a-c-corporation-the-new-vogue-in-business-structure.html

Deductible Repairs Versus Capitalization

https://lawprofessors.typepad.com/agriculturallaw/2018/03/deductible-repairs-versus-capitalization.html

The Tax Treatment of Farming Net Operating Losses

https://lawprofessors.typepad.com/agriculturallaw/2018/03/the-tax-treatment-of-farming-net-operating-losses.html

Congress Modifies the Qualified Business Income Deduction

https://lawprofessors.typepad.com/agriculturallaw/2018/03/congress-modifies-the-qualified-business-income-deduction.html

IRS Collections – The Basics

https://lawprofessors.typepad.com/agriculturallaw/2018/03/irs-collections-the-basics-.html

Tax Issues Associated with Oil and Gas Production

https://lawprofessors.typepad.com/agriculturallaw/2018/03/tax-issues-associated-with-oil-and-gas-production.html

Refundable Fuel Credits – Following the Rules Matters

https://lawprofessors.typepad.com/agriculturallaw/2018/04/refundable-fuel-credits-following-the-rules-matters.html

Distinguishing Between a Capital Lease and an Operating Lease

https://lawprofessors.typepad.com/agriculturallaw/2018/04/distinguishing-between-a-capital-lease-and-an-operating-lease.html

End of Tax Preparation Season Means Tax Seminar Season is About to Begin

https://lawprofessors.typepad.com/agriculturallaw/2018/04/end-of-tax-preparation-season-means-tax-seminar-season-is-about-to-begin.html

Passive Activities and Grouping

https://lawprofessors.typepad.com/agriculturallaw/2018/04/passive-activities-and-grouping.html

Divorce and the New Tax Law – IRS Grants Some Relief

https://lawprofessors.typepad.com/agriculturallaw/2018/04/divorce-and-the-new-tax-law-irs-grants-some-relief.html

Gifts of Ag Commodities to Children and the New Tax Law

https://lawprofessors.typepad.com/agriculturallaw/2018/04/gifts-of-ag-commodities-to-children-and-the-new-tax-law.html

Post-Death Sale of Crops and Livestock

https://lawprofessors.typepad.com/agriculturallaw/2018/04/post-death-sale-of-crops-and-livestock.html

Is There a Downside Risk to E-Filing Your Taxes?

https://lawprofessors.typepad.com/agriculturallaw/2018/05/is-there-a-downside-risk-to-e-filing-your-taxes.html

Purchase and Sale Allocations to CRP Contracts

https://lawprofessors.typepad.com/agriculturallaw/2018/05/purchase-and-sale-allocations-to-crp-contracts.html

Converting a C Corporation to an S Corporation – The Problem of Passive Income

https://lawprofessors.typepad.com/agriculturallaw/2018/05/converting-a-c-corporation-to-an-s-corporation-the-problem-of-passive-income.html

The Impact of the TCJA on Estates and Trusts

https://lawprofessors.typepad.com/agriculturallaw/2018/05/the-impact-of-the-tcja-on-estates-and-trusts.html

The TCJA and I.R.C. 529 Plans

https://lawprofessors.typepad.com/agriculturallaw/2018/05/the-tcja-and-irc-529-plans.html

Farmers, Self-Employment Tax, and Personal Property Leases

https://lawprofessors.typepad.com/agriculturallaw/2018/06/farmers-self-employment-tax-and-personal-property-leases.html

State Taxation of Online Sales

https://lawprofessors.typepad.com/agriculturallaw/2018/06/state-taxation-of-online-sales.html

The Depletion Deduction for Oil and Gas Operations

https://lawprofessors.typepad.com/agriculturallaw/2018/07/the-depletion-deduction-for-oil-and-gas-operations.html

Charitable Giving Post-2017

https://lawprofessors.typepad.com/agriculturallaw/2018/07/charitable-giving-post-2017.html

When is an Informal Business Arrangement a Partnership?

https://lawprofessors.typepad.com/agriculturallaw/2018/07/when-is-an-informal-business-arrangement-a-partnership.html

Management Activities and the Passive Loss Rules

https://lawprofessors.typepad.com/agriculturallaw/2018/07/management-activities-and-the-passive-loss-rules.html

Tax Issues on Repossession of Farmland

https://lawprofessors.typepad.com/agriculturallaw/2018/07/tax-issues-on-repossession-of-farmland.html

Outline of Tax Proposals Released

https://lawprofessors.typepad.com/agriculturallaw/2018/07/outline-of-tax-proposals-released.html

Life Estate/Remainder Arrangements and Income Tax Basis

https://lawprofessors.typepad.com/agriculturallaw/2018/08/life-estateremainder-arrangements-and-income-tax-basis-.html

Expense Method Depreciation and Trusts

https://lawprofessors.typepad.com/agriculturallaw/2018/08/expense-method-depreciation-and-trusts.html

Qualified Business Income Deduction – Proposed Regulations

https://lawprofessors.typepad.com/agriculturallaw/2018/08/qualified-business-income-deduction-proposed-regulations.html

The Qualified Business Income Deduction and “W-2 Wages”

https://lawprofessors.typepad.com/agriculturallaw/2018/08/the-qualified-business-income-deduction-and-w-2-wages.html

Tax Consequences on Partition and Sale of Land

https://lawprofessors.typepad.com/agriculturallaw/2018/09/tax-consequences-on-partition-and-sale-of-land.html

Deducting Residual Soil Fertility

https://lawprofessors.typepad.com/agriculturallaw/2018/09/deducting-residual-soil-fertility.html

Social Security Planning for Farmers

https://lawprofessors.typepad.com/agriculturallaw/2018/10/social-security-planning-for-farmers.html

Eliminating Capital Gain Tax – Qualified Opportunity Zones

https://lawprofessors.typepad.com/agriculturallaw/2018/10/eliminating-capital-gain-tax-qualified-opportunity-zones.html

The TCJA, Charitable Giving and a Donor-Advised Fund

https://lawprofessors.typepad.com/agriculturallaw/2018/10/the-tcja-charitable-giving-and-a-donor-advised-fund.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

What is Depreciable Farm Real Property?

https://lawprofessors.typepad.com/agriculturallaw/2018/10/what-is-depreciable-farm-real-property.html

What is “Like-Kind” Real Estate?

https://lawprofessors.typepad.com/agriculturallaw/2018/10/what-is-like-kind-real-estate.html

Developments in Ag Law and Tax

https://lawprofessors.typepad.com/agriculturallaw/2018/11/developments-in-ag-law-and-tax.html

Trusts and Like-Kind Exchanges

https://lawprofessors.typepad.com/agriculturallaw/2018/11/trusts-and-like-kind-exchanges.html

Unpaid Tax at Death – How Long Does IRS Have to Collect?

https://lawprofessors.typepad.com/agriculturallaw/2018/11/unpaid-tax-at-death-how-long-does-irs-have-to-collect.html

Non-Depreciable Items on the Farm or Ranch

https://lawprofessors.typepad.com/agriculturallaw/2018/11/non-depreciable-items-on-the-farm-or-ranch.html

What are the Tax Consequences on Sale or Exchange of a Partnership Interest?

https://lawprofessors.typepad.com/agriculturallaw/2018/12/what-are-the-tax-consequences-on-sale-or-exchange-of-a-partnership-interest.html

Expense Method Depreciation and Structures on the Farm

https://lawprofessors.typepad.com/agriculturallaw/2018/12/expense-method-depreciation-and-structures-on-the-farm.html

Deduction Costs Associated with Items Purchased for Resale

https://lawprofessors.typepad.com/agriculturallaw/2018/12/sale-of-items-purchased-for-resale.html

Claiming Business Deductions? – Maintain Good Records, and… Hire a Tax Preparer

            https://lawprofessors.typepad.com/agriculturallaw/income-tax/page/7/

Depletion – What is it and When is it Available?

https://lawprofessors.typepad.com/agriculturallaw/2018/12/depletion-what-is-it-and-when-is-it-available.html

The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html

INSURANCE

Beneficiary Designations, Changed Circumstances and the Contracts Clause

https://lawprofessors.typepad.com/agriculturallaw/2018/07/beneficiary-designations-changed-circumstances-and-the-contracts-clause.html

Recent Developments Involving Crop Insurance

https://lawprofessors.typepad.com/agriculturallaw/2018/08/recent-developments-involving-crop-insurance.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

Farm Liability Policies – Are All Activities on the Farm Covered?

https://lawprofessors.typepad.com/agriculturallaw/2018/11/farm-liability-policies-are-all-activities-on-the-farm-covered.html

The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html

REAL PROPERTY

In-Kind Partition and Adverse Possession – Two Important Concepts in Agriculture

https://lawprofessors.typepad.com/agriculturallaw/2018/01/in-kind-partition-and-adverse-possession-two-important-concepts-in-agriculture.html

Some Thoughts on the Importance of Leasing Farmland

https://lawprofessors.typepad.com/agriculturallaw/2018/02/some-thoughts-on-the-importance-of-leasing-farmland.html

Prescriptive Easements and Adverse Possession – Obtaining Title to Land Without Paying for It

https://lawprofessors.typepad.com/agriculturallaw/2018/03/prescriptive-easements-and-adverse-possession-obtaining-title-to-land-without-paying-for-it.html

Purchase and Sale Allocations to CRP Contracts

https://lawprofessors.typepad.com/agriculturallaw/2018/05/purchase-and-sale-allocations-to-crp-contracts.html

Tax Issues on Repossession of Farmland

https://lawprofessors.typepad.com/agriculturallaw/2018/07/tax-issues-on-repossession-of-farmland.html

The Accommodation Doctrine – Working Out Uses Between Surfaces and Subsurface Owners

https://lawprofessors.typepad.com/agriculturallaw/2018/09/the-accommodation-doctrine-working-out-uses-between-surface-and-subsurface-owners.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

What is “Like-Kind” Real Estate?

https://lawprofessors.typepad.com/agriculturallaw/2018/10/what-is-like-kind-real-estate.html

Negative Easements – Is There a Right to Unobstructed Light, Air, or View?

https://lawprofessors.typepad.com/agriculturallaw/2018/11/negative-easements-is-their-a-right-to-unobstructed-light-air-or-view.html

 The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html

REGULATORY LAW

The “Almost Top Ten” Agricultural Law and Tax Developments of 2017

https://lawprofessors.typepad.com/agriculturallaw/2018/01/the-almost-top-ten-agricultural-law-and-tax-developments-of-2017.html

Top Ten Agricultural Law and Tax Developments of 2017 (Ten through Six)

https://lawprofessors.typepad.com/agriculturallaw/2018/01/top-ten-agricultural-law-and-tax-developments-of-2017-ten-through-six.html

Is There a Constitutional Way to Protect Animal Ag Facilities?

https://lawprofessors.typepad.com/agriculturallaw/2018/01/is-there-a-constitutional-way-to-protect-animal-ag-facilities.html

Trade Issues and Tariffs – Are Agriculture’s Concerns Legitimate?

https://lawprofessors.typepad.com/agriculturallaw/2018/03/trade-issues-and-tariffs-are-agricultures-concerns-legitimate.html

Federal Crop Insurance – Some Recent Case Developments

https://lawprofessors.typepad.com/agriculturallaw/2018/04/federal-crop-insurance-some-recent-case-developments.html

Non-Tax Ag Provisions in the Omnibus Bill

https://lawprofessors.typepad.com/agriculturallaw/2018/04/non-tax-ag-provisions-in-the-omnibus-bill.html

Are Mandatory Assessments for Generic Advertising of Ag Commodities Constitutional?

https://lawprofessors.typepad.com/agriculturallaw/2018/06/are-mandatory-assessments-for-generic-advertising-of-ag-commodities-constitutional.html

Wind Farm Nuisance Matter Resolved – Buy the Homeowners Out!

https://lawprofessors.typepad.com/agriculturallaw/2018/06/wind-farm-nuisance-matter-resolved-buy-the-homeowners-out.html

Regulation of Wetlands and “Ipse Dixit” Determinations

https://lawprofessors.typepad.com/agriculturallaw/2018/07/regulation-of-wetlands-and-ipse-dixit-determinations.html

Ag Employment – Verifying the Legal Status of Employees

https://lawprofessors.typepad.com/agriculturallaw/2018/08/ag-employment-verifying-the-legal-status-of-employees.html

Roadkill – It’s What’s for Dinner

https://lawprofessors.typepad.com/agriculturallaw/2018/09/roadkill-its-whats-for-dinner.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

“Waters of the United States” Means “Frozen Soil”?

https://lawprofessors.typepad.com/agriculturallaw/2018/11/waters-of-the-united-states-means-frozen-soil.html

How Long Can a Train Block a Crossing?

https://lawprofessors.typepad.com/agriculturallaw/2018/11/how-long-can-a-train-block-a-crossing.html

The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html  

SECURED TRANSACTIONS

Ag Finance – Getting the Debtor’s Name Correct on the Financing Statements

https://lawprofessors.typepad.com/agriculturallaw/2018/02/ag-finance-getting-the-debtors-name-correct-on-the-financing-statement.html

What Are “Proceeds” of Crops and Livestock?

https://lawprofessors.typepad.com/agriculturallaw/2018/09/what-are-proceeds-of-crops-and-livestock.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html

SEMINARS AND CONFERENCES

Agricultural Law and Economics Conference

https://lawprofessors.typepad.com/agriculturallaw/2018/07/agricultural-law-and-economics-conference.html

Summer Farm Income Tax/Estate and Business Planning Conference

https://lawprofessors.typepad.com/agriculturallaw/2018/02/summer-farm-income-taxestate-and-business-planning-conference.html

Upcoming Seminars

            https://lawprofessors.typepad.com/agriculturallaw/2018/08/upcoming-seminars.html

Fall Tax Seminars

            https://lawprofessors.typepad.com/agriculturallaw/2018/09/fall-tax-seminars.html

Year-End Ag Tax Seminar/Webinar

https://lawprofessors.typepad.com/agriculturallaw/2018/12/year-end-ag-tax-seminarwebinar.html

WATER LAW

Top Ten Agricultural Law and Tax Developments of 2017 (Ten through Six)

https://lawprofessors.typepad.com/agriculturallaw/2018/01/top-ten-agricultural-law-and-tax-developments-of-2017-ten-through-six.html

Top Ten Agricultural Law and Tax Developments of 2017 (Five through One)

https://lawprofessors.typepad.com/agriculturallaw/2018/01/top-ten-agricultural-law-and-tax-developments-of-2017-five-through-one.html

The Accommodation Doctrine – Working on Uses Between Surface and Subsurface Owners

https://lawprofessors.typepad.com/agriculturallaw/2018/09/the-accommodation-doctrine-working-out-uses-between-surface-and-subsurface-owners.html

Agricultural Law Online!

            https://lawprofessors.typepad.com/agriculturallaw/2018/10/agricultural-law-online.html

Drainage Issues – Rules for Handling Excess Surface Water

https://lawprofessors.typepad.com/agriculturallaw/2018/12/drainage-issues-rules-for-handling-excess-surface-water.html

The “Almost Top Ten” Ag Law and Tax Developments of 2018

https://lawprofessors.typepad.com/agriculturallaw/2018/12/the-almost-top-ten-ag-law-and-tax-developments-of-2018.html  

March 21, 2021 in Bankruptcy, Business Planning, Civil Liabilities, Contracts, Cooperatives, Criminal Liabilities, Environmental Law, Estate Planning, Income Tax, Insurance, Real Property, Regulatory Law, Secured Transactions, Water Law | Permalink | Comments (0)

Friday, March 19, 2021

August National Farm Tax and Estate/Business Planning Conference

Overview

On August 2-3, in Missoula, Montana, at the Hilton Garden Inn, Washburn Law School will hold the second of two summer 2021 national conferences focusing on farm and ranch income tax and farm and ranch estate/business planning.  This first of the two national conference is in Ohio on June 7-8.  You may read about the details of that event here: https://lawprofessors.typepad.com/agriculturallaw/2021/03/june-national-farm-tax-and-estatebusiness-planning-conference.html.    

These are great conferences for attorneys, CPAs and other tax practitioners, agribusiness professionals, farmers, and others interested in learning more about the legal and tax issues associated with income tax planning and management and estate and business planning for those engaged in the trade or business of farming.

The August 2-3 Monana conference – it’s the topic of today’s post.

Day 1 Agenda

On Monday, August 2, our focus will be on farm income tax issues.  Joining me for the day is Paul Neiffer, a Principal (Agribusiness) with CliftonLarsonAllen, LLP.  Paul and I have worked together on the seminar circuit for a number of years and enjoy teaching together to farm tax audiences.  Many of you know of Paul via his Farm CPA Today blog. 

I will begin Day 1 with an update on what’s been happening in the courts and IRS/Treasury that has implications for those engaged in farming.  Paul will then address the lingering issues with the Employee Retention Credit (ERC) and the Paycheck Protection Program (PPP) and the varied client situations and questions that arose during the 2020 tax season.  The morning session will then continue with coverage of various miscellaneous topics – NOL rules; like-kind exchanges; amending partnership returns; oil and gas taxation basics.  Paul will then conclude the morning with a discussion of the final I.R.C. §199A regulations. 

After the luncheon, Matthew Bohlmann, the IRS-CI Senior Analyst National Coordinator for the Identity Theft program under Cyber Crimes-Headquarters, will explain how to protect your practice and your clients against cyber threats and tax fraud, and steps that your offices can take to protect client data.  After Matt’s session, Paul and I will address various tax and entity structuring issues relevant to maximizing federal farm program payments for farmers.  Then, I will take a dive into the tax legislation and policy arena to assess what has happened and what might happen in the near future that impacts tax planning. 

Day 2 Agenda

On Tuesday, August 3, we change our focus to the estate and business planning side of things.  2021 is a big year for potential change in this area of the law, with huge implications for farm and ranch clients (and others).  What is going to happen with the level of the estate tax exemption? What about the present interest annual exclusion?  Will corporate tax rates change?  Will the QBID be eliminated?  What’s the IRS doing with the partnership audit rules?  Should a client’s business organizational form be changed?  The answers to all of these questions are up in the air right now.  But each one of them is critically important.

I will begin Day 2 with an overview of caselaw and IRS administrative and regulatory developments.  Following my update session, Dr. Gary Brester, an Emeritus Professor in the Department of Ag Econ at Montana St. University will address how farmers and ranchers can maintain competitiveness for success.  What’s the impact and role of technology on production agriculture?  What’s the current status of the U.S. food and fiber sector?  Dr. Brester will address these and other issues during his presentation.  It is always a good idea to be in tune with the economic environment that clients function in.  Doing so helps anticipate legal and tax issues that might arise and provides planning opportunities that otherwise might be missed. 

After the morning break, I will touch on some selected issues with respect to the special use valuation election that can be made on a farmer/rancher’s estate tax return.  This is a very complex provision of the Code, and it may be back in “vogue” again if the federal estate tax exemption is reduced from its current level.  To round out the morning, I will discuss corporate reorganizations.  Of course, this topic is being driven by the possibility of changes in the law that could impact how the farming or ranching operation should be structured.  A major focus will be on divisive reorganizations. 

After the luncheon, Robert Moore, an attorney practicing near Columbus, Ohio will continue the discussion of the use of business entities in farm succession planning.  Mr. Moore has a focus on estate and business planning for farmers in his practice.  He will address several strategies for succession planning and how to keep the family in the farm for subsequent generations. 

Following the afternoon break, Katherine Merck of the Falen Law Offices of Cheyenne, Wyoming, will address property law issues that arise in the process of transitioning the farm/ranch business to the next generation.  Many real estate issues can arise in the business succession process including easements on land; water and grazing rights; and details with respect to legal descriptions, just to name a few. 

The concluding session of Day 2 will be an hour of ethics by Prof. Shawn Leisinger from the law school.  This session will an interactive session with attendees involving ethical issues surrounding clients with end-of-life decisions that need to be made by the client and family members.  This is a very important topic that practitioners often have to deal with and some rather thorny ethical issues must be dealt with.

Online Attendance

If you can’t make the conference in-person, both days will be live simulcast over the web.  You will be able to interact with the speakers by asking questions and hearing responses. 

Location

The conference will be held at the Hilton Garden Inn in Missoula.  Missoula is located near some of the most beautiful parts of the United States.  Missoula is located between Glacier National Park and Yellowstone National Park, and is also near the Bitterroot Mountain Range and Lolo Pass.  There are plenty of sight-seeing and vacation opportunities that can be wrapped around the event. 

Room Block

A room block has been established for the weekend before the conference and through the conference. 

Rates

The fee for the conference varies depending on whether you are claiming continuing education credit.  If not, the registration rate is lower.  We welcome farmers, ranchers and others that don’t need continuing education credit to attend along with those that will be claiming professional education credit.

Additional Sponsors

As of today, we are thankful for the sponsorship of the First State Bank of Nebraska; the Falen Law Offices of Cheyenne, Wyoming, Agrilegacy and Base.  You may learn more about the sponsors here: 

https://www.1fsb.bank/

https://buddfalen.com/

http://agrilegacy.com/

https://www.baseonline.com/

If you are interested in becoming a sponsor, please contact me.  It’s a great way to market your business.

More Information

You can learn more about the August conference and register here:  https://www.washburnlaw.edu/employers/cle/farmandranchtaxaugust.html

Conclusion

I hope to see you at one of the conferences this summer or, if not, I hope that you are able to attend online.  This content and discussion will be valuable to your practice and/or farming or ranching operation.

March 19, 2021 in Business Planning, Estate Planning, Income Tax | Permalink | Comments (0)

Wednesday, March 17, 2021

Selling Farm Business Assets – Special Tax Treatment (Part Three)

Overview

Last week, in Part One, I discussed the basic structure and scope of I.R.C. §1231.  In Part Two, I continued the discussion with the definition of “livestock for purposes of I.R.C. §1231, the “holding period” requirement and the procedure for netting gains and losses, as well as the proper classification of unharvested crops that are sold with land.

Section 1231 also can be involved in transactions involving water rights, self-rents of livestock and timber.  Section 1231 transactions continued - it’s the topic of today’s post.

Does a Sale of Water Qualify?

Whether a sale of water qualifies for Section 1231 treatment depends on whether the seller retains a continuing interest in the water.  Vest v. Comr., 57 T.C. 128 (1971), aff’d., 481 F.2d 238 (5th Cir. 1973)If the seller retains an economic interest, the gain on sale is treated as ordinary income. This includes, reserving the right to use water for livestock purposes where it does not amount to a sale of the water in place. Puckett v. Comr., T.C. Memo. 1964-40, aff’d., 355 F.2d 551 (5th Cir. 1966). 

In the Vest case, for example, the taxpayers owned land and associated water and mineral rights.  The Shell Oil Company (Shell) proposed to buy the water rights along with a right-of-way so that the water and mineral rights could more easily be developed.  The taxpayers entered into a contract with Shell to transfer the water rights to all water between 3,000 and 6,500 feet beneath their land.  The taxpayers reserved a sufficient quantity of water for their own exploration and production of minerals.  Ultimately, Shell paid the taxpayers over $26,000 for the water that it extracted and transported from the property of neighboring landowners.  The taxpayers reported the income as capital gain, but the IRS determined that it was ordinary income from a “lease.”  The Tax Court ruled against the IRS, determining that the transaction between the parties amounted to a sale of the water in place and a permanent interest in the property for a right-of-way. 

On further review, the appellate court noted that the transaction was not easy to categorize as it contained elements of both a lease and a sale.  Ultimately, however, the appellate court determined that the taxpayers had retained an economic interest in the water rights and the right-of way.  The taxpayers simply had not transferred to Shell all of the water in place or a specific quantity of it, and Shell controlled the conditions under which its obligation arose to make payment over a 75-year timeframe.  It had no duty to extract any “purchase price water” at all and, if it did not, the taxpayers would receive nothing.  This relationship between payment and production, the appellate court noted, meant that the taxpayers had retained an economic interest in the water rights that had been transferred to Shell and that the proceeds from the transaction were ordinary income. 

Note:   In Gladden v. Comr., 112 T.C. 209 (1999), the Tax Court held that the water rights that the petitioners relinquished in the Colorado River were capital assets because the allocation of the rights was directly linked to the capital investment in the land.  As such, the transaction amounted to a sale or exchange.

Self-Rental of Livestock – Converting Capital Gain to Ordinary Income?

What is the result when the taxpayer leases livestock that otherwise qualify for Section 1231 to an entity that the taxpayer owns?  Does Section 1231 tax treatment apply in some fashion?  In Dudden v. Comr., 893 F. 2d 174 (8th Cir 1990), the taxpayers (a married couple) were the sole shareholders of a farming corporation engaged in the trade or business of raising hogs.  They held title to brood sows and gilts (the breeding herd) and leased the animals to the corporation under a sow lease agreement.  Under the lease, the corporation was given possession of the breeding “sow” herd.  As noted, the taxpayers retained legal title to the sows and gilts.  Sows were kept for about two years (roughly five breedings) before the corporation culled them and returned them to the taxpayers.  When a sow was culled, one gilt was placed in the breeding herd as a replacement.  Title to the gilt remained with the taxpayers.  Thus, the breeding herd was constantly maintained at 150 sows. 

The taxpayers sold the culled sows (which were raised sows) and reported the gain as a Section 1231 gain, and took the position that the “lease” did not trigger gain because it was a mere bailment – title to replacement gilts never vested in the corporation and the corporation could not sell replacement gilts. The corporation was entitled to all pigs farrowed (whether gilt or barrow), except those designated as replacement gilts.  The corporation fed and cared for the replacement gilts until they reached a breeding weight of 220 pounds.  The gilts were then transferred to the taxpayers and the taxpayers raised them to a breeding weight of 270 pounds at which point the gilts were reintroduced in the breeding herd via a re-lease to the corporation.  A gilt pen was maintained where the replacement gilts were the ones that had superior genetics. 

The IRS disagreed with the taxpayers’ tax treatment of the transaction, claiming that the taxpayers received “rent” when a gilt was placed in the breeding herd as a beginning sow even though the taxpayers neither paid nor deducted any “rent” expense.  The amount of the rent, according to the IRS was the slaughter value of the gilt on the day of the placement in the breeding herd.  The taxpayer, according to the IRS then had basis in the gilt that could be depreciated over the next two years.  That deprecation, the IRS maintained, would be recaptured to the extent of the deprecation upon sale as a culled sow.  Thus, the IRS position was that the taxpayers were engaged in the trade or business of selling culled sows, the income from which should be reported on Schedule F.  The IRS took this position even though the selling of culled sows was not a major part of the taxpayers’ overall farming operation.  It merely served as a means of getting the taxpayers’ children into the farming operation without significant capital investment.

The Tax Court agreed with the IRS position.  Dudden v. Comr., 91 T.C. 642 (1988)

The appellate court, while noting that the lease did have characteristics of a bailment, upheld the Tax Court’s determination that the taxpayers realized potential rental income when the corporation transferred the 220-pound replacement gilts to the taxpayers, and rental income when the gilts reached 270 pounds and were re-leased to the corporation.  That rental income, the appellate court held, should have been recognized when the gilts were reintroduced into the breeding herd and re-leased to the corporation.  The lease, the appellate court noted, provided a means by which the taxpayers could draw income from the corporation in the form of value from the replacement gilts that they didn’t initially possess and didn’t need to buy.  The appellate court pointed out that the lease stated that the transfer of replacement gilts constituted consideration for the lease – they were rent that the corporation “paid” in exchange for the right to use the taxpayers’ breeding herd, a breeding herd that the taxpayers held title to but didn’t have a current possessory interest in. 

The appellate court noted that rent is typically taxable as ordinary income upon receipt in the hands of a cash basis taxpayer.  I.R.C. §61(a)(5).  The appellate court took the position that, under the lease, the corporation held title to the gilts farrowed and title to the replacement gilts vested in the taxpayers when the 220-pound replacement gilts were acquired under the lease.  Based on this construction of the lease, there was a potential for realized income at this point in time.   It then followed, according to the appellate court, that when the replacement gilts reached 270 pounds (their breeding weight), the taxpayers actually realized rental income because they then had beneficial ownership (title, burden and expense).  As such, the lease was the same as a crop share lease with the taxpayers as landlords and rental income was recognized when the replacement gilts were re-leased to the corporation and reintroduced into the breeding herd.  That was the point in time when there was an addition to capital and livestock were reduced to money or an equivalent of money.  Thus, the appellate court reasoned, the crop-share recognition rule applied.  See Treas. Reg. §1.61-4(a)(5).  The money equivalent (ordinary income) of the rental income, the appellate court concluded, could be measured from the USDA price quotation sheets for slaughter value on the date when the taxpayers selected the replacement gilts.  Added to that amount would be the value of the corporation’s cost of providing food and care for the gilts while they were being prepared for breeding. 

Note:   The appellate court’s construction of the lease and computation of “rental income” is highly suspect.  The taxpayers maintained title to a replacement gilt from the time of birth.  There was no title transfer.  Possession was transferred, but that was no different than what occurred by the corporation’s use of the breeding herd.  In addition, the appellate court’s use of USDA price quotation sheets for slaughter value of gilts to peg the rental income is suspect.  A completely separate live market existed for the sale of gilts which yielded different (and more accurate) prices.

Special Rule for Timber

For timber farmers (those in the trade or business of harvesting and selling timber), the sale of the timber generates ordinary income. But, an election can be made by an owner of standing timber or a taxpayer that holds a contract right to cut timber (and has held the right for more than a year) to treat the cutting of timber as a sale or exchange that is eligible for capital gain treatment.  Id.  Via the election, the taxpayer gets capital gain treatment on the income in the value of the timber until it is cut.  A later sale generates ordinary income or loss. 

Capital gain treatment is also the result when a standing timber owner disposes of timber. I.R.C. §631(b)

Christmas trees.  “Timber” includes evergreen trees if they are more than six years old at the time they are cut and are sold for ornamental purposes (e.g., Christmas Trees).  I.R.C. §631(a).  But, sale of Christmas trees on a “choose and cut” basis are not eligible for capital gain treatment.  Eck v. Comr., 99 T.C. 1 (1992); Rev. Rul., 77-229, 1977-2 C.B. 210.  Also, Christmas trees that are less than six years old at the time of cutting are not “timber” and are subject to the capitalization rules of I.R.C. §263A.  That means that all of the costs of raising the trees must be added to basis unless the taxpayer elects out of the application of the rules.  I.R.C. §263A(d)(3).  If the election is made, when the trees are sold the costs that would otherwise have been capitalized are subject to recapture as ordinary income and alternative depreciation is required.  I.R.C. §263A(e). 

Conclusion

Section 1231 assets are accorded special tax treatment under the Code.  For farmers and ranchers that treatment can come up in many common transactions. 

March 17, 2021 in Income Tax | Permalink | Comments (0)

Monday, March 15, 2021

Selling Farm Business Assets – Special Tax Treatment (Part Two)

Overview

Last week, in Part One, I discussed the basic structure and scope of I.R.C. §1231.  In today’s post I continue with the definition of “livestock for purposes of I.R.C. §1231, the “holding period” requirement and the procedure for netting gains and losses, as well as the proper classification of unharvested crops that are sold with land.

The unique tax treatment of “Section 1231” assets for farmers and ranchers, Part Two of what has now become a Three-Part series – it’s the topic of today’s post.

Benefit of Section 1231

As mentioned in Part One, upon the sale or exchange of Section 1231 property, the result is either capital gain or ordinary loss.  Net gains from the sale of Section 1231 assets are long-term capital gains.  As such, they are taxed at favorable rates.  Presently, long-term capital gains are taxed at the rate of zero percent, 15 percent, or 20 percent, depending on a combination of the taxpayer’s taxable income and marital status.  For a husband and wife filing jointly, the 20 percent rate kicks-in at an income above $501,600.  The capital gain rate for a married couple filing jointly is zero up to an income level of $80,800. 

If the losses on Section 1231 transactions exceed the gains, the net loss is treated as an ordinary loss.  That’s also a favorable outcome for the taxpayer.  But, it’s important to remember that I.R.C. § 1231 does not apply to depreciation that must be recaptured as ordinary income under either I.R.C. § 1245 (depreciable personal property and certain real property) or I.R.C. §1250 (depreciable real property that is not I.R.C. §1245 property).

Definition of “Livestock”

“Livestock” is defined broadly for Section 1231 purposes.  The term includes cattle, hogs, horses, mules, donkeys, sheep, goats, fur-bearing animals and other mammals.  Treas. Reg. §1.1231-2(a)(3).  The term can also include trophy deer that are raised as part of a taxpayer’s trade or business of farming.  See TAM 9615001 (Oct. 17, 1995).  But “livestock” for Section 1231 purposes does not include poultry, chickens, turkeys, pigeons, geese, other birds, fish, frogs or reptiles.  Treas. Reg. §1.1231-2(a)(3).  In general, the term includes any mammal held for breeding or sporting purposes. including some furbearing animals.  For example, Chinchilla count if the taxpayer holds them for breeding purposes.  Greer v. Comr., 17 T.C. 965 (1951), acq., 1953-1 C.B. 4.  Mink and fox also count Rev. Rul. 57-88, 1957-1 C.B. 88.  Likewise, culled mink pelts also can be treated as a Section 1231 asset in the hands of a taxpayer engaged in the trade or business of raising mink for the purpose of selling mink pelts.  United States v. Cook, 270 F.2d 725 (8th Cir. 1959).  But, bees (and probably, other insects) are not “livestock” for Section 1231 purposes.  Sykes v. Comr., 57 T.C. 618 (1972).

Holding Period

To receive Section 1231 treatment, qualified livestock that are held for a qualified purpose (draft, dairy, breeding or sporting purposes) a taxpayer must hold the livestock for a required amount of time.  I.R.C. §1231(b)(3).  For cattle and horses, the holding period is at least 24 months.  I.R.C. §1231(b)(3)(A).  For all other livestock, the holding period is at least 12 months.  I.R.C. §1231(b)(3)(B). 

Measuring – general rule. A taxpayer determines whether the holding period has been satisfied by not counting the day on which an asset was acquired and including the day on which the asset is sold.  Rev. Rul. 66-7, 1966-1 C.B. 188; Caspe v. United States, 694 F.2d 1116 (8th Cir. 1982). 

Measuring – sale by an estate.  Property that is included in a decedent’s estate at death and receives a basis equal to the fair market value of the property at death under I.R.C. §1014 is treated at having been held for more than one year.  I.R.C. §1223(9).  It doesn’t matter how long the taxpayer actually held the property before death.  Id.  Likewise, for property that a decedent holds until the date of death, if it is disposed of within 18 months after the decedent’s death, it is deemed to have been held more than 18 months.  IRS Notice 97-59, 1997-2 C.B. 309.  But, this rule doesn’t apply to livestock – the special holding periods for livestock contained in I.R.C. §1231(b)(3)(A)-(B) continue to apply.  Rev. Rul. 75-361, 1975-2 C.B. 344.  Thus, the decedent must have held the livestock for the applicable holding period before death for the heir to receive long-term capital gain treatment upon sale by the estate. 

The “Netting” Process

For Section 1231 assets, net gains from them are long-term capital gains.  If losses are greater than gains, the net loss is treated as an ordinary loss.  I.R.C. §1231(a)(2).    Stated another way, if net Section 1231 losses exceed net Section 1231 gains, the gains and losses are not treated as “gains and losses from sales or exchanges of capital assets.”  Id.  The instructions to IRS Form 4797 set forth how to report Section 1231 transactions.  But, in a nutshell, long-term capital gains and losses (including Section 1231 gains and losses) are separated by the tax rates that apply to them.  The assets are separated by type (e.g., capital loss carryovers; collectibles; unrecaptured I.R.C. §1250 gain; gain taxed at 10 percent, etc.).  Then, short-term capital losses (including short-term capital loss carryovers) are applied first to reduce short-term capital gains in a particular order (tied to the applicable tax rate).  After that, any net loss from a particular tax rate group reduces gain from gains that are taxed at different rates in a specified order.  This is all set forth in the instructions to Form 4797 in good detail.

What About Unharvested Crops Sold With Land?

For land that is sold with an unharvested crop, if both the land and the growing crops are used in the seller’s trade or business of farming and are sold (or exchanged or compulsorily or involuntarily converted) to the same buyer in a single transaction, the land and crops are considered to be “property used in the trade or business.”  I.R.C. §1231(b)(4).  If the seller held the land for more than a year before the sale, Section 1231 treatment is available.  Treas. Reg. §1.1231-1(c)(5).

But, a catch is present if the taxpayer is on the cash method.  In this situation, when computing taxable income, the seller cannot claim any deductions for the unharvested crop attributable to the crop’s production either for the tax year of sale or not.  The seller must capitalize the costs of raising the crop.  I.R.C. §268. 

Another point is that Section 1231 treatment is not available for an unharvested crop if the seller retains any right or option, either directly or indirectly, to reacquire the land that the crop is growing on.  Treas. Reg. §1.1231-1(f); Priv. Ltr. Rul. 8504014 (Oct. 22, 1984).  For this purpose, a right that is incident to a mortgage (or other security interest) is not considered to be a “right or option.”  Treas. Reg. §1.1231-1(f). 

Note:   A leasehold or an estate for a term of years is not “land” for purposes of Section 1231.  Id.  Thus, when a crop is raised on land where the taxpayer (as landlord) sells the lease and the unharvested crop in one transaction, the sale results in ordinary income.  Bidart Brothers v. United States, 262 F.2d 607 (9th Cir. 1959). 

The sale of raised crops or livestock in the estate of a decedent that was an active farmer generally results in ordinary income recognition.  Sale of land on which crops constituting property are growing, by an estate, results in capital gain treatment for the income attributable to the crop.  I.R.C. §§268; 1231(b)(4).  If the crops are harvested during the process of liquidating the farming business and selling the land, it might be possible to characterize the sale of the crops as part of the liquidation and achieve capital gain treatment. 

Conclusion

In Part Three next time, I will continue the Section 1231 discussion as applied to the sale of water rights, livestock self-rent situations, and timber sales.  Stay tuned. 

March 15, 2021 in Income Tax | Permalink | Comments (0)

Tuesday, March 9, 2021

Tax Update Webinar

Overview

This Friday, Mar. 12, I will be doing a two-hour tax update webinar.  I will address the late 2020 legislation, new guidance from the SBA and IRS and the tax changes included in the recent massive spending legislation enacted into law.

Upcoming tax update webinar – it’s the topic of today’s post.

Recent Legislation

The 2020 tax filing season has been a difficult one for practitioners given the lateness of tax legislation contained in the Consolidated Appropriations Act, 2021 (CAA).  The CAA, 2021 contains many individual, business, payroll, disaster, and energy-related tax provisions. The legislation also extends many provisions that were set to expire at the end of 2020. Other provisions on the new law are virus-related, including additional "stimulus" payments and an extension of payroll credits as well as pension and other employee benefit provisions and modifications to the Payroll Protection Program (PPP). In addition, changes were made to the rules surrounding the deductibility of business meals provided by restaurants in 2021 and 2022. For farmers and ranchers, the CAA, 2021 makes changes to the existing Coronavirus Food Assistance Program (CFAP) and appropriates additional funds for various agricultural programs.

If the lateness of 2020 legislation impacting tax returns didn’t pose enough tax problems for practitioners, in recent days, the U.S. Senate passed its version of the nearly $2 trillion spending bill, the “American Rescue Plan Act.”  The Senate’s version is basically the same as the House bill, but the Senate did make some changes that require the bill to go back to the House for another (and final) vote.   

Provisions in the bill that impact tax are as follows:

  • Extension of $300 per week unemployment benefit through September 6 (it would have expired in mid-March. In addition, the first $10,200 of unemployment benefits is tax-free (not in original House bill).
  • A third round of stimulus checks in the amount of $1,400.
  • An increase in the child tax credit to $3,000 (up from $2,000) for children between the age of 6 and 17 and $3,600 for children under 6. The credit would be direct deposited periodically in the taxpayer's account.
  • Expansion of the Employee Retention Tax Credit;
  • Tax-free virus-related student debt relief;
  • Extension to September 30 of the tax credits to businesses that provide paid family leave; and
  • Increased Obamacare tax subsidies.

Registration Information

During the webinar, I will bring you up to speed on the key changes since late December and provide insight as to how the changes impact farm and non-farm businesses.  I will also suggest planning steps that taxpayers should be taking now based on the new changes.

For registration information, click here:  https://washburnlaw.edu/employers/cle/taxupdatecaa.html

March 9, 2021 in Income Tax | Permalink | Comments (0)

Sunday, March 7, 2021

Selling Farm Business Assets – Special Tax Treatment (Part One)

Overview

In general, gains and losses arising from the sale of farmland, depreciable assets used in the farm business, draft, breeding, dairy and sporting livestock, unharvested crops sold with the land, and some other transactions receive a special form of tax treatment.  This is a very advantageous tax treatment for farmers and ranchers.  The section of the Internal Revenue Code involved is I.R.C. §1231, and assets that receive this special tax treatment are known as “Section 1231” assets. 

In today’s Part One of a Two-Part series, I discuss the basic structure and scope of Section 1231.  Later this week, in Part Two, I will take a look at the definition of “livestock,” the “holding period,” the procedure for netting gains and losses, and some other special situations involving Section 1231 assets. 

The unique tax treatment of “Section 1231” assets for farmers and ranchers, Part One of a Two-Part series – it’s the topic of today’s post.

Basic Structure

Upon the sale or exchange of Section 1231 property, the result is either capital gain or ordinary loss.  Net gains from the sale of Section 1231 assets are long-term capital gains.  As such, they are taxed at favorable rates.  Presently, long-term capital gains are taxed at the rate of zero percent, 15 percent, or 20 percent, depending on a combination of the taxpayer’s taxable income and marital status.  For a husband and wife filing jointly, the 20 percent rate kicks-in at an income above $501,600.  The capital gain rate for a married couple filing jointly is zero up to an income level of $80,800. 

If the losses on Section 1231 transactions exceed the gains, the net loss is treated as an ordinary loss.  That’s also a favorable outcome for the taxpayer. 

This favorable tax treatment, however, can only be achieved if all of the eligibility requirements for I.R.C. §1231 are satisfied. 

What is Section 1231 Property – The “Scope” Question

The “use” issue – burden of proof.  To be Section 1231 property, the property must be used in the taxpayer’s trade or business.  I.R.C. §1231(b).  The property cannot be held for sale to customers.  The property must also be subject to depreciation and held for more than one year.  I.R.C. §1231(b)(1).  Real property also qualifies if it is used in the taxpayer’s trade or business and held for more than a year.  Id.  But, property is not Section 1231 property if it is inventory property; property held primarily for sale to customers in the ordinary course of business; a copyright, literary, musical or artistic composition or a U.S. government publication.  I.R.C. §§1231(b)(1)(C-D).  The taxpayer bears the burden to establish that property qualifies as Section 1231 property.  For instance, in Gettings v. Comr., T.C. Memo. 1988-328, the court held that sales of cattle were not eligible for capital gain treatment because the taxpayer couldn’t prove that the cattle were not held for sale to customers in the ordinary course of business or that the cattle were depreciable assets.  The Tax Court pointed out that the taxpayer considered all of his cattle as available for sale at any time. 

By statute, Section 1231 assets include timber, coal and iron ore (I.R.C. §1231(b)(2)); cattle and horses that the taxpayer holds for draft, dairy or sporting purposes that are held for 24 months or more from the date of acquisition (I.R.C. §1231(b)(3)(A)); other livestock that is held for draft, dairy or sporting purposes that are held for 12 months or more (I.R.C. §1231(b)(3)(B)); and unharvested crops on land that used in the taxpayer’s trade or business and held for more than one year if the crop and the land are sold or exchanged (or compulsorily or involuntarily converted at the same time to the same person).  I.R.C. §1231(b)(4).  Poultry is not “livestock” for purposes of I.R.C. §1231.

Determining use.  The requirement that the asset be held for use in the taxpayer’s trade or business (I.R.C. §1231(a)) is key.  Income from the sale of assets that are held “primarily for sale to customers in the ordinary course of business” do not receive Section 1231 treatment.  The regulations and the courts point out that the reason or purpose for which a taxpayer “holds” and animal is based on the facts.  A key fact in that determination is how the taxpayer uses any particular animal.  Thus, an animal that is held for ultimate sale to customers in the ordinary course of the taxpayer’s business may still be deemed to be held for draft, dairy or breeding purposes.  Treas. Reg. §1.1231-2(b)(1).  The examples in the regulations under Treas. Reg. §1.1231-2(b)(2) are very helpful illustrations of how the use of an animal impacts eligibility for Section 1231 treatment. 

The caselaw is also helpful in defining the scope of Section 1231.  In Contra Biltmore Co. v. United States, 129 F. Supp. 366 (W.D.N.C. 1955), aff’d., 228 F.2d 9 (4th Cir. 1955), the issue was whether bull-calves between six and eleven months of age, and heifer-calves between six and twenty-four months old raised and sold by a dairy cattle herder, were 'property held primarily for sale to customers or were property used in the taxpayer’s trade or business.  The IRS prevailed on its argument that bulls and heifers that were sold before they reached the age of productivity were not Section 1231 assets even though the taxpayer retained them as standby replacements.  Likewise, calves of a producing herd have been held to not constitute section 1231 property.  Fox v. Comr., 198 F.2d 719 (4th Cir. 1952).  The court determined that the calves were the production of Section 1231 property.  In Bandes v. Comr., T.C. Memo. 1982-355, the issue was whether the sale of pregnant gilts were properly characterized as long-term capital gain under I.R.C. §1231.  The taxpayer retained two females from each litter for breeding purposes.  The Tax Court disallowed Section 1231 treatment upon a finding that the taxpayers did not intend to hold the gilts for breeding purposes.  Instead, the Tax Court determined that the taxpayer was attempting to convert ordinary income to capital gain through the operation of Section 1231.  Facts matter.

For farmers that maintain a breeding herd the herd is often culled of unfit animals.  The sale of culled cows, for example, can qualify for Section 1231 treatment if the farmer can show that the culled cows were no longer suitable for breeding purposes or at least different from those livestock that were not sold.  The motive to cull is controlling rather than when the culling occurred or how the animals were culled.  But, if heifers are culled shortly before the annual spring sale, that could cause the IRS to question the purpose for which the heifers are held.  See, e.g., Hillman v. United States, 2002-2 U.S.T.C. para. 50,700 (D. S.D. 2002).  If the facts indicate that that taxpayer was in the business of selling breeding stock, a court is likely to deny section 1231 treatment for the culled animals.  See, e.g., A. Duda & Sons, Inc. v. United States, 560 F.2d 669 (5th Cir. 1977), rev’g., 383 F. Supp. 1303 (M.D. Fla. 1974).   Be careful in promoting and marketing the sale of the culled animals!  You don’t want to be too visible.  In addition, the IRS could asset self-employment tax on the sale proceeds.  Again, relevant to that determination is the degree of marketing and promotion of the annual spring sale.

Other situations.  An animal can still be determined to be held for a breeding purpose if it is disposed of within a reasonable time after its intended use is prevented or made undesirable by reason of accident, disease, unfitness or something similar.  Treas. Reg. §1.1231-2(b)(1).  Also, if the taxpayer’s plans change and animals must be sold, Section 1231 treatment might be proper.  See, e.g., Coldwater Cattle Co. v. United States, No. 2756-Civil, 1961 U.S. Dist. LEXIS 5430 (N.D. Tex. Jan. 9, 1961); Clingman v. United States, No. F-75-194 Civ., 1977 U.S. Dist. LEXIS 17033 (E.D. Cal. Mar. 7, 1977).  Similarly, weather can play a role.  In Carter v. Comr., 257 F2d 595 (5th Cir. 1958), the taxpayer bought heifers to start a breeding herd but sold them shortly thereafter because weather conditions made feeding difficult.  The court held that Section 1231 treatment was available for the sale of the heifers. 

With respect to the sale of pregnant breeding stock, the question is whether an allocation of a portion of the selling price must be made to the unborn young?  The Tax Court has said that no allocation is required.  In Metz v. United States, No. 1446, 1962 U.S. Dist. LEXIS 5176 (E.D. Ky. Mar. 27, 1962), the Tax Court reasoned that allocation was not required to an unborn because of the uncertainty of a successful birth. 

For horses, if a horse is held for racing purposes (e.g., for racing at a public track or a horse trained for racing purposes) the regulations, in general, consider the horse to be held for sporting purposes.  Treas. Reg. §§1.1231-2(c)(1) & (c)(1)(i).  But, if a horse has never been raced or trained for racing, it would likely not be considered to be held for racing purposes.  Horses used for team roping may present a problem for the taxpayer in establishing the existence of a trade or business - a prerequisite for Section 1231 treatment.  See, e.g., Gallegos v. Comr., T.C. Memo. 2021-25.  A colt that isn’t fit for sporting purposes can still qualify for section 1231 treatment even if it hasn’t been trained very much or raced.  For instance, in Kirk v. Comr., 47 T.C. 177 (1966), acq., 1967-1 C.B. 2, the Tax Court held that horses that had been culled because they weren’t adequate for use a harness horses in the hands of a professional harness racer qualified for Section 1231 treatment. 

In Bradshaw v. United States, No. 2154, 1971 U.S. Dist. LEXIS 10564 (E.D. Ky. Dec. 1, 1971), the plaintiff kept approximately four stallions and 35 mares for breeding.  Normally about 25 foals were born each year.  After weaning in the fall, the plaintiff culled the foals and sold them at public auction before training them.  The plaintiff reported the gain as ordinary income.  The rest of the yearlings were broken to bridal and lead.  Throughout the training process, some of the horses were determined to be undesirable for showing or breeding.  These horses continued to train, but they were classified as “cull” and sold at private sales.  The IRS claimed that the plaintiff was in the business of selling show horses and that if a buyer wanted to purchase any horse on his farm, he would sell the horse and report the gain as long-term capital gain.  The horses that the plaintiff sold included mares, stallions and geldings.  Geldings cannot be used for breeding purposes, so the plaintiff relied on the general provisions of I.R.C. § 1231(b)(1) (an asset used in the trade or business that is subject to depreciation and has been held for more than one year) rather than the more specific provisions of I.R.C. §1231(b)(3) (the provision for livestock).  The court cited the Kirk case for the proposition that the existence of the (b)(3) did not preclude the horses from qualifying under the general provisions of (b)(1). The IRS did not appeal, but issued an Action on Decision stating that the decision was probably wrong because the horses sold were not segregated from the remaining horses, but were kept in training and sold only when buyers selected them from purchase.  However, the IRS noted that the jury verdict was not clearly erroneous.  1971 AOD LEXIS 486 (Dec. 10, 1971).

For embryo transplants, the animal from which the embryo came is the section 1231 asset – it is deemed to be held for breeding purposes.  Rev. Rul. 86-24, 1986-1 C.B. 80; Treas. Reg. §1.1231-2(b)(1).  When the cow in which the implanted embryo is purchased, the purchase price is to be allocated between the cow and the embryo of the basis of the fair market value of each.  The cost allocated to the embryo is capitalized.  The resulting calves that are born from the embryo implantation will trigger ordinary income (or loss) on sale if they are held for sale to customers in the ordinary course of business.  With respect to embryo transplant services, however, the IRS is on the look-out for sham transactions.  Investments in cattle breeding operations may be suspect from the IRS standpoint.  The transaction must have economic substance.  If not, the IRS will disregard the transaction.  See, e.g., In re Gran, 964 F.2d 822 (8th Cir. 1992); Boyer v. Comr., T.C. Memo. 1992-724.

Conclusion

In Part Two, I will continue the discussion of other aspects of Section 1231.  It’s a unique and beneficial part of the Code for farmers and ranchers.

March 7, 2021 in Income Tax | Permalink | Comments (0)

Friday, March 5, 2021

June National Farm Tax and Estate/Business Planning Conference

Overview

On June 7-8 at the Shawnee State Park Lodge and Conference Center near West Portsmouth, Ohio, Washburn Law School will hold the first of two summer 2021 national conferences focusing on farm income tax and farmer estate/business planning.  The second event will be August 2-3 in Missoula, Montana.  These are great conferences for attorneys, CPAs and other tax practitioners, agribusiness professionals, farmers, and others interested in learning more about the legal and tax issues associated with income tax planning and management and estate and business planning for those engaged in the trade or business of farming.

The June 7-8 Ohio conference – it’s the topic of today’s post.

Day 1 Agenda

On Monday, June 7, our focus will be on farm income tax issues.  Joining me for the day is Paul Neiffer, a Principal (Agribusiness) with CliftonLarsonAllen, LLP.  Paul and I have worked together on the seminar circuit for a number of years and enjoy teaching together to farm tax audiences.  Many of you know of Paul via his Farm CPA Today blog. 

I will begin Day 1 with an update on what’s been happening in the courts and IRS/Treasury that has implications for those engaged in farming.  Paul will then address the lingering issues with the Employee Retention Credit (ERC) and the Paycheck Protection Program (PPP) and the varied client situations and questions that arose during the 2020 tax season.  The morning session will then continue with coverage of various miscellaneous topics – NOL rules; like-kind exchanges; amending partnership returns; oil and gas taxation basics.  Paul will then conclude the morning with a discussion of the final I.R.C. §199A regulations. 

After the luncheon, Matthew Bohlmann, the IRS-CI Senior Analyst National Coordinator for the Identity Theft program under Cyber Crimes-Headquarters, will explain how to protect your practice and your clients against cyber threats and tax fraud, and steps that your offices can take to protect client data.  After Matt’s session, Paul and I will address various tax and entity structuring issues relevant to maximizing federal farm program payments for farmers.  Then, I will take a dive into the tax legislation and policy arena to assess what has happened and what might happen in the near future that impacts tax planning. 

Day 2 Agenda

On Tuesday, June 8, we change our focus to the estate and business planning side of things.  2021 is a big year for potential change in this area of the law, with huge implications for farm and ranch clients (and others).  What is going to happen with the level of the estate tax exemption? What about the present interest annual exclusion?  Will corporate tax rates change?  Will the QBID be eliminated?  What’s the IRS doing with the partnership audit rules?  Should a client’s business organizational form be changed?  The answers to all of these questions are up in the air right now.  But each one of them is critically important.

I will begin Day 2 with an overview of caselaw and IRS administrative and regulatory developments.  Following my update session, Dr. William Snell from the University of Kentucky Ag Econ Department will provide his insights into the current status of the farm economy.  It is always a good idea to be in tune with the economic environment that clients function in.  That helps anticipate legal and tax issues that might arise and provides planning opportunities that otherwise might be missed.  After the morning break, I will touch on some selected issues with respect to the special use valuation election that can be made on a farmer/rancher’s estate tax return.  This is a very complex provision of the Code, and it may be back in “vogue” again if the federal estate tax exemption is reduced from its current level.  To round out the morning, I will discuss corporate reorganizations.  Of course, this topic is being driven by the possibility of changes in the law that could impact how the farming or ranching operation should be structured.  A major focus will be on divisive reorganizations. 

After the luncheon, Robert Moore, an attorney practicing near Columbus, Ohio will continue the discussion of the use of business entities in farm succession planning.  Mr. Moore has a focus on estate and business planning for farmers in his practice.  He will address several strategies for succession planning and how to keep the family in the farm for subsequent generations.  Following the afternoon break I will go through the issues facing farmers in financial distress and provide some insight into strategies for managing tax and legal issues that are inherent in such situations. 

The concluding session of Day 2 will be an hour of ethics by Prof. Shawn Leisinger from the law school.  This session will an interactive session with attendees involving ethical issues surrounding clients with end-of-life decisions that need to be made by the client and family members.  This is a very important topic that practitioners often have to deal with and some rather thorny ethical issues must be dealt with.

Online Attendance

If you can’t make the conference in-person, both days will be live simulcast over the web.  You will be able to interact with the speakers by asking questions and hearing responses. 

Location

The conference will be held at the Shawnee State Park Lodge and Conference Center in southern Ohio near West Portsmouth Ohio.  The location is almost equally distanced from Lexington, KY, Columbus, OH and Cincinnati, OH.  If you will be flying in, flights into any of those airports would be your best choice. 

Room Block

A room block has been established for the weekend before the conference and through the conference. 

Rates

The fee for the conference varies depending on whether you are claiming continuing education credit.  If not, the registration rate is lower.  We welcome farmers, ranchers and others that don’t need continuing education credit to attend along with those that will be claiming professional education credit.

Additional Sponsors

As of today, we are thankful for the sponsorship of the Wright and Moore Law Company of Delaware, OH, and AgriLegacy.  You may learn more about the Wright and Moore Law Company here: https://www.ohiofarmlaw.com/ and AgriLegacy here: https://agrilegacy.com/  If you are interested in becoming a sponsor, please contact me.

More Information

You can learn more about the conference and register here:  https://washburnlaw.edu/employers/cle/farmandranchtaxjune.html

August Conference

On August 2-3 we will conduct the second of the two summer conferences in Missoula, MT.  The program agenda there will be slightly different, and I will do a separate post on that conference next week.  That conference will also be simulcast over the web for those unable to attend in person.

Conclusion

I hope to see you at one of the conferences this summer or, if not, I hope that you are able to attend online.  This content and discussion will be valuable to your practice and/or farming or ranching operation.

March 5, 2021 in Business Planning, Estate Planning, Income Tax | Permalink | Comments (0)

Tuesday, March 2, 2021

Cross-Collateralization Clauses – Tough Lessons For Lenders

Overview

The farm economy, in general, is in better shape than it was three or fours years ago.  Crop prices are stronger, land values remain firm, and interest rates (at least for the time being) remain low.  But, that doesn’t mean that financial problems associated with the most recent farm economic downturn are all in the past.  Indeed, the legal and financial systems often address issues long after the initial problems arose. 

One of the most recent issues is a mix of those financial and legal issues.  Farmers often need to borrow money to finance their operations, and lenders must decide whether making ag loans are a good idea.  That means that a lender must understand clause language contained in a potential farm borrower’s existing lending documents and the associated rights and obligations of the parties.

Once of those clauses merits a close look.  It’s known as a “cross collateralization” clause.  If a potential lender doesn’t understand what the clause language means, the lender can end up losing the priority position that it thought it had.

A “cross-collateralization clause in a lending instrument – it’s the topic of today’s post.

Cross-Collateralization

Defined.  I examined the issue of cross-collateralization in a post in late 2017 that you may read here: https://lawprofessors.typepad.com/agriculturallaw/2017/10/tough-financial-times-in-agriculture-and-lending-clauses-peril-for-the-unwary.html. There, I noted that “cross-collateralization” is a term that describes a situation when the collateral for one loan is also used as collateral for another loan. For example, if a farmer takes out multiple loans with the same lender, the security for one loan can be used as cross-collateral for all the loans.

Clause language.  As noted above, clause language in lending and leasing documents should be carefully reviewed and understood for their implications.  This is particularly true with respect to cross-collateralization language.  For example, the following is an example of such a clause that appears to be common in John Deere Financial security agreements.  Here is how the language of one particular clause reads:

Security Interest; Missing Information.  You grant us and our affiliates a security interest in the Equipment (and all proceeds thereof) to secure all of your obligations under this Contract and any other obligations which you may have to us or any of our affiliates or assignees at any time and you agree that any security interest you have granted or hereafter grant to us or any of our affiliates shall also secure your obligations under this Contract.  You agree that we may act as agent for our affiliates and our affiliates may as agent for us, in order to perfect and realize on any security interest described above.  Upon receipt of all amounts due and to become due under this Contract, we will release our security interest in the Equipment (but not the security interest for amounts due an affiliate), provided no event of default has occurred and is continuing.  You agree to keep the Equipment free and clear of all liens and encumbrances, except those in favor of us and our affiliates as described above, and to promptly notify us if a lien or encumbrance is placed or threated against the Equipment.  You irrevocably authorize us, at any time, to (a) insert or correct information on this Contract, including your correct legal name, serial numbers and Equipment descriptions; (b) submit notices and proofs of loss for any required insurance; (c) endorse your name on remittances for insurance and Equipment sale or lease proceeds; and (d) file a financing statement(s) which describes either the Equipment or all equipment currently or in the future financed by us.  Notwithstanding any other election you may make, you agree that (1) we can access any information regarding the location, maintenance, operation and condition of the Equipment; (2) you irrevocably authorize anyone in possession of that information to provide all of that information to us upon our request; (3) you will not disable or otherwise interfere with any information gathering or transmission device within or attached to the Equipment; and (4) we may reactivate such device.”

So, what does that clause language mean?  Several points can be made:

  • The clause grants Deere Financial and its affiliates a security interest in the equipment pledged as collateral to secure the obligations owed to it as well as its affiliates.
  • When all obligations (including debt on the equipment purchased under the contract and all other debts for the purchase of equipment that Deere Financial finances) to Deere under the contract are paid, Deere Financial will release its security interest in the equipment. That appears to be straightforward and unsurprising.  However, the release does not release the security interest of the Deere’s affiliates.  This is the cross-collateral provision. 
  • The clause also makes Deere Financial the agent of its affiliates, and it makes the affiliates the agent of Deere Financial for purposes of perfection. What the clause appears to mean is that if a financing statement was not filed timely, perfection by possession could be pursued.
  • The clause also irrevocably authorizes John Deere to insert or correct information on the contract.
  • The clause allows John Deere to access any information regarding the location, maintenance, operation and condition of the collateral.
  • The clause also irrevocably authorizes anyone in possession of that information to provide it to John Deere upon request.
  • Also, under the clause, the purchaser agrees not to disable or interfere with any information gathering or transmission device in or attached to the Equipment and authorizes John Deere to reactivate any device.

Example.  Consider the following example of the effect of cross-collateralization by machinery sellers and financiers:

Assets

Value

 

Creditor

Amount

Equity by Item

JD 4710 Sprayer 90' Boom

       60,000

 

JD Finance

       84,000

(24,000)

JD 333E Compact Track Loader

       50,000

 

JD Finance

       35,000

 15,000

JD 8410T Crawler Tractor

       70,000

 

JD Finance

       50,000

 20,000

JD 612C 12 Row Corn Head

       70,000

 

JD Finance

       25,000

 45,000

     

Farm Plan

       58,571

(58,571)

Total Value

     250,000

 

Total Liabilities

     252,571

  (2,571)

           
     

Equity with Cross Collateralization

        (2,571)

 
           
     

Equity without Cross Collateralization

       80,000

 

The equity in the equipment without cross-collateralization is the sum of the equity in the Compact Track Loader, the Crawler Tractor and the Row Corn Head ($80,000).  With cross-collateralization, however, the equity in the equipment is $2,571. 

Sellers that finance the purchase price of the item(s) sold (termed a “purchase money” lender) are using cross-collateralization provisions with some degree of frequency.  As noted above, the cross-collateralization provisions of the John Deere security agreement will allow John Deere to offset its under-secured status on some machinery by using the equity in other financed collateral to make up the unsecured portion of its claims.  Other machinery financiers (such as CNH and AgDirect) are utilizing similar cross-collateral provisions in their security agreements. 

Impact of Cross-Collateralization on “Dragnet” Liens

The issue.  Would a bank’s properly filed financing statement and perfected blanket security agreement be sufficient to defeat a cross-collateralization provision?  Stated differently, would an equipment dealer’s financing of equipment via a lending document containing a cross-collateralization clause be sufficient to allow the dealer’s subsequently filed financing statement(s) to defeat the prior perfected security interest of another lender, such as a bank?  

In some instances, when a purchase money security interest holder has sought to enforce a cross-collateralization clause, the purchase money security interest holder has always backed down.  For example, in one recent scenario, John Deere Financial sought to enforce its cross-collateralization agreement against a Bank in a situation similar to the one set forth above.  The bank properly countered that its blanket security interest in farm equipment perfected before any of the Deere Financial purchase money security interests were perfected defeated the Deere Financial cross-collateralization.  Deere Financial backed down thereby allowing the bank to have all the equity in the equipment, $80,000, be paid to the bank by the auctioneer after the liquidation auction.

Recent case.  In a recent bankruptcy case from Kentucky, In re Duvall, No. 19-11272(1)(12), 2021 Bankr. LEXIS 22 (Bankr. W.D. Ky. Jan. 7, 2021), a bank found out to its detriment how an equipment financier’s cross-collateralization clause works.  In the late 1990s, two individuals started a farming partnership.  The business arrangement lacked formality and largely involved sharing machinery and equipment.  To sustain the farming operations, they obtained financing from various lenders, either individually or collaboratively, including John Deere Financial (JDF).  The debtor, one of the individuals in the farming partnership, applied for a “Multi-Use Account” with JDF in late 2013.  The Multi-Use Account line of credit was governed by a Credit Agreement and secured by collateral of John Deere pursuant to cross-collateralization clauses in numerous John Deere security agreements executed when John Deere financed (via purchase-money security interests (PMSIs)) various machinery and equipment purchases of the debtor.  The first one of the John Deere PMSIs was in late October of 2016 for the debtor’s purchase of three tractors.  That PMSI and all subsequent John Deere PMSI’s (of which there were many) contained the standard John Deere cross-collateralization clause language noted above.

After the initial John Deere PMSI, various other lenders, including a bank, loaned funds to the debtor and attempted to take security interests in the debtor’s machinery, equipment, tools and after-acquired property.  Ultimately, the debtor defaulted on the Multi-Use Account which made the entire account balance of $274,000 to become due along with all of the outstanding amounts on the PMSIs.  About a year later, the debtor filed Chapter 12 bankruptcy.  John Deere filed a proof of claim in the bankruptcy matter and the bank filed an adversary proceeding to establish lien priority.

The bankruptcy court determined that John Deere possessed valid PMSIs in its collateral and had properly perfected them in accordance with the Kentucky Uniform Commercial Code (KUCC).  As such, John Deere’s PMSIs were prior and superior to any other interest that the bank or any other lender had in the collateral.  The bankruptcy court also noted that the debtor, in each of the security agreements, not only granted John Deere a security interest in the collateral that the security agreement/financing statement described, but also agreed to the John Deere cross-collateralization clause language.  The bankruptcy court held that the cross-collateralization clause in each of the security agreements was valid under the KUCC.  The bankruptcy court specifically noted that, “Subsection [(1)], together with subsection [(3)], also validates “cross-collateral” clauses under which collateral acquired at any time secures advances whenever made.”  Comment 2 to K.R.S. §355.9-204.  Thus, the amounts loaned to the debtor via the Multi-Use Account were also secured by John Deere’s collateral.  The result was that John Deere had a second priority security interest in its collateral, behind only it’s valid PMSIs via the cross-collateralization clauses.  The bank (and other lenders) lost. 

Conclusion

If a farmer is presented with a lending transaction that involves either a cross-collateralization or a co-lessee clause, legal counsel with experience in such transactions should be consulted.  Fully understanding the risks involved can pay big dividends.  Failing to understand the terms of these clauses can lead to the financial failure of the farmer that signs the document.  The same points apply to lenders.

March 2, 2021 in Secured Transactions | Permalink | Comments (0)

Sunday, February 28, 2021

Ag Law and Taxation - 2019 Bibliography

Overview

Today's post is a bibliography of my ag law and tax blog articles of 2019.  Many of you have requested that I provide something like this to make it easier to find the articles, and last month I posted the bibliography of the 2020 articles.  Soon I will post the bibliography of the 2018 articles and then 2017 and 2016. 

The library of content is piling up.

Cataloging the 2019 ag law and tax blog articles - it's the topic of today's post.

BANKRUPTCY

Non-Dischargeable Debts in Bankruptcy

https://lawprofessors.typepad.com/agriculturallaw/2019/02/non-dischargeable-debts-in-bankruptcy.html

Developments in Agricultural Law and Taxation

https://lawprofessors.typepad.com/agriculturallaw/2019/03/developments-in-agricultural-law-and-taxation.html

More Recent Developments in Agricultural Law

https://lawprofessors.typepad.com/agriculturallaw/2019/03/more-recent-developments-in-agricultural-law.html

More Ag Law and Tax Developments

https://lawprofessors.typepad.com/agriculturallaw/2019/05/more-ag-law-and-tax-developments.html

Farmers, Bankruptcy and the “Absolute Priority” Rule

https://lawprofessors.typepad.com/agriculturallaw/2019/07/farmers-bankruptcy-and-the-absolute-priority-rule.html

Ag in the Courtroom

            https://lawprofessors.typepad.com/agriculturallaw/2019/07/ag-in-the-courtroom.html

Key Farm Bankruptcy Modification on the Horizon?

https://lawprofessors.typepad.com/agriculturallaw/2019/07/key-farm-bankruptcy-modification-on-the-horizon.html

Ag Legal Issues in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2019/08/ag-legal-issues-in-the-courts.html

Are Taxes Dischargeable in Bankruptcy?

https://lawprofessors.typepad.com/agriculturallaw/2019/09/are-taxes-dischargeable-in-bankruptcy.html

The “Almost Top Ten” Ag Law and Ag Tax Developments of 2019

https://lawprofessors.typepad.com/agriculturallaw/2019/12/the-almost-top-ten-ag-law-and-ag-tax-developments-of-2019.html 

BUSINESS PLANNING

Can a State Tax a Trust with No Contact with the State?

https://lawprofessors.typepad.com/agriculturallaw/2019/02/can-a-state-tax-a-trust-with-no-contact-with-the-state.html

Real Estate Professionals and Aggregation – The Passive Loss Rules

https://lawprofessors.typepad.com/agriculturallaw/2019/03/real-estate-professionals-and-aggregation-the-passive-loss-rules.html  

More Recent Developments in Agricultural Law

https://lawprofessors.typepad.com/agriculturallaw/2019/03/more-recent-developments-in-agricultural-law.html

Self-Rentals and the Passive Loss Rules

https://lawprofessors.typepad.com/agriculturallaw/2019/04/self-rentals-and-the-passive-loss-rules.html    

What’s the Best Entity Structure for the Farm or Ranch Business?

https://lawprofessors.typepad.com/agriculturallaw/2019/05/whats-the-best-entity-structure-for-the-farm-or-ranch-business.html

Where Does Life Insurance Fit in an Estate Plan for a Farmer or Rancher?

https://lawprofessors.typepad.com/agriculturallaw/2019/05/where-does-life-insurance-fit-in-an-estate-plan-for-a-farmer-or-rancher.html

Recent Developments in Farm and Ranch Business Planning

https://lawprofessors.typepad.com/agriculturallaw/2019/06/recent-developments-in-farm-and-ranch-business-planning.html

ESOPs and Ag Businesses – Part One

https://lawprofessors.typepad.com/agriculturallaw/2019/07/esops-and-ag-businesses-part-one.html

ESOPs and Ag Businesses – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2019/07/esops-and-ag-businesses-part-two.html

Is a Discount for The BIG Tax Available?

https://lawprofessors.typepad.com/agriculturallaw/2019/08/is-a-discount-for-the-big-tax-available.html

Tax Consequences of Forgiving Installment Payment Debt

https://lawprofessors.typepad.com/agriculturallaw/2019/09/tax-consequences-of-forgiving-installment-payment-debt.html

Ag Law and Tax in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2019/09/ag-law-and-tax-in-the-courts.html

Shareholder Loans and S Corporation Stock Basis

https://lawprofessors.typepad.com/agriculturallaw/2019/09/shareholder-loans-and-s-corporation-stock-basis.html

The Family Limited Partnership – Part One

https://lawprofessors.typepad.com/agriculturallaw/2019/09/the-family-limited-partnership-part-one.html

The Family Limited Partnership – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2019/09/the-family-limited-partnership-part-two.html

Does the Sale of Farmland Trigger Net Investment Income Tax?

https://lawprofessors.typepad.com/agriculturallaw/2019/10/does-the-sale-of-farmland-trigger-net-investment-income-tax.html

Some Thoughts on Ag Estate/Business/Succession Planning

https://lawprofessors.typepad.com/agriculturallaw/2019/11/some-thoughts-on-ag-estatebusinesssuccession-planning.html

S Corporation Considerations

https://lawprofessors.typepad.com/agriculturallaw/2019/11/s-corporation-considerations.html

CIVIL LIABILITIES

When is an Employer Liable for the Conduct of Workers?

https://lawprofessors.typepad.com/agriculturallaw/2019/01/when-is-an-employer-liable-for-the-conduct-of-workers.html

Selected Recent Cases Involving Agricultural Law

https://lawprofessors.typepad.com/agriculturallaw/2019/01/selected-recent-cases-involving-agricultural-law.html

Ag Nuisances – Basic Principles

https://lawprofessors.typepad.com/agriculturallaw/2019/02/ag-nuisances-basic-principles.html

Do the Roundup Jury Verdicts Have Meaning For My Farming Operation?

https://lawprofessors.typepad.com/agriculturallaw/2019/04/do-the-roundup-jury-verdicts-have-meaning-for-my-farming-operation.html

What Does a “Reasonable Farmer” Know?

https://lawprofessors.typepad.com/agriculturallaw/2019/04/what-does-a-reasonable-farmer-know.html

Product Liability Down on the Farm - Modifications

https://lawprofessors.typepad.com/agriculturallaw/2019/05/product-liability-down-on-the-farm-modifications.html

Coming-To-The-Nuisance By Staying Put – Or, When 200 Equals 8,000

https://lawprofessors.typepad.com/agriculturallaw/2019/05/coming-to-the-nuisance-by-staying-put-or-when-200-equals-8000.html

More Ag Law and Tax Developments

https://lawprofessors.typepad.com/agriculturallaw/2019/05/more-ag-law-and-tax-developments.html

Public Trust vs. Private Rights – Where’s the Line?

https://lawprofessors.typepad.com/agriculturallaw/2019/06/public-trust-vs-private-rights-wheres-the-line.html

Ag Law in the Courts

            https://lawprofessors.typepad.com/agriculturallaw/2019/11/ag-law-in-the-courts.html

Fence Law Basics

            https://lawprofessors.typepad.com/agriculturallaw/2019/11/fence-law-basics.html

CONTRACTS

Negotiating Cell/Wireless Tower Agreements

https://lawprofessors.typepad.com/agriculturallaw/2019/01/negotiating-cellwireless-tower-agreements.html

Developments in Agricultural Law and Taxation

https://lawprofessors.typepad.com/agriculturallaw/2019/03/developments-in-agricultural-law-and-taxation.html

Ag Contracts – What if Goods Don’t Conform to the Contract?

https://lawprofessors.typepad.com/agriculturallaw/2019/09/ag-contracts-what-if-goods-dont-conform-to-the-contract.html

ENVIRONMENTAL LAW

Top 10 Developments in Ag Law and Tax for 2018 – Numbers 10 and 9

https://lawprofessors.typepad.com/agriculturallaw/2019/01/top-10-developments-in-ag-law-and-tax-for-2018-numbers-10-and-9.html

Top 10 Developments in Ag Law and Tax for 2018 – Numbers 8 and 7

https://lawprofessors.typepad.com/agriculturallaw/2019/01/top-10-developments-in-ag-law-and-tax-for-2018-numbers-8-and-7.html

Top Ten Agricultural Law and Tax Developments of 2018 – Numbers 6, 5, and 4

https://lawprofessors.typepad.com/agriculturallaw/2019/01/top-ten-agricultural-law-and-tax-developments-of-2018-numbers-6-5-and-4.html

Top Ten Agricultural Law and Tax Developments of 2018 – Numbers 3, 2, and 1

https://lawprofessors.typepad.com/agriculturallaw/2019/01/top-ten-agricultural-law-and-tax-developments-of-2018-numbers-3-2-and-1.html

Big EPA Developments – WOTUS and Advisory Committees

https://lawprofessors.typepad.com/agriculturallaw/2019/02/big-epa-developments-wotus-and-advisory-committees.html

Does Soil Erosion Pose a Constitutional Issue?

https://lawprofessors.typepad.com/agriculturallaw/2019/04/does-soil-erosion-pose-a-constitutional-issue.html

Public Trust vs. Private Rights – Where’s the Line?

https://lawprofessors.typepad.com/agriculturallaw/2019/06/public-trust-vs-private-rights-wheres-the-line.html

More Ag Law and Tax Developments

https://lawprofessors.typepad.com/agriculturallaw/2019/05/more-ag-law-and-tax-developments.html

Eminent Domain and Agriculture

https://lawprofessors.typepad.com/agriculturallaw/2019/06/eminent-domain-and-agriculture.html

Court Decisions Illustrates USDA’s Swampbuster “Incompetence”

https://lawprofessors.typepad.com/agriculturallaw/2019/08/court-decision-illustrates-usdas-swampbuster-incompetence.html

Regulatory Changes to the Endangered Species Act

https://lawprofessors.typepad.com/agriculturallaw/2019/09/regulatory-changes-to-the-endangered-species-act.html

Irrigation Return Flows and the Clean Water Act

https://lawprofessors.typepad.com/agriculturallaw/2019/09/irrigation-return-flows-and-the-clean-water-act.html

Ag Law in the Courts

            https://lawprofessors.typepad.com/agriculturallaw/2019/10/ag-law-in-the-courts.html

Regulatory Takings – Pursuing a Remedy

https://lawprofessors.typepad.com/agriculturallaw/2019/10/regulatory-takings-pursuing-a-remedy.html

Does a Pollutant Discharge From Groundwater into a WOTUS Require a Federal Permit?

https://lawprofessors.typepad.com/agriculturallaw/2019/11/does-a-pollutant-discharge-from-groundwater-into-a-wotus-require-a-federal-permit.html

Groundwater Discharges of Pollutants and the Supreme Court

https://lawprofessors.typepad.com/agriculturallaw/2019/11/groundwater-discharges-of-pollutants-and-the-supreme-court.html

The “Almost Top Ten” Ag Law and Ag Tax Developments of 2019

https://lawprofessors.typepad.com/agriculturallaw/2019/12/the-almost-top-ten-ag-law-and-ag-tax-developments-of-2019.html

ESTATE PLANNING

Tax Filing Season Update and Summer Seminar!

https://lawprofessors.typepad.com/agriculturallaw/2019/01/tax-filing-season-update-and-summer-seminar.html

Time to Review Estate Planning Documents?

https://lawprofessors.typepad.com/agriculturallaw/2019/02/time-to-review-of-estate-planning-documents.html

Can a State Tax a Trust with No Contact with the State?

https://lawprofessors.typepad.com/agriculturallaw/2019/02/can-a-state-tax-a-trust-with-no-contact-with-the-state.html

Estate Planning in Second Marriage Situations

https://lawprofessors.typepad.com/agriculturallaw/2019/02/estate-planning-in-second-marriage-situations.html

Valuing Non-Cash Charitable Gifts

https://lawprofessors.typepad.com/agriculturallaw/2019/03/valuing-non-cash-charitable-gifts.html

Real Estate Professionals and Aggregation – The Passive Loss Rules

https://lawprofessors.typepad.com/agriculturallaw/2019/03/real-estate-professionals-and-aggregation-the-passive-loss-rules.html

Can the IRS Collect Unpaid Estate Tax From the Beneficiaries?

https://lawprofessors.typepad.com/agriculturallaw/2019/03/can-the-irs-collect-unpaid-estate-tax-from-the-beneficiaries.html

Sale of the Personal Residence After Death

https://lawprofessors.typepad.com/agriculturallaw/2019/03/sale-of-the-personal-residence-after-death.html

More Recent Developments in Agricultural Law

https://lawprofessors.typepad.com/agriculturallaw/2019/03/more-recent-developments-in-agricultural-law.html

Thrills with Wills – When is a Will “Unduly Influenced”?

https://lawprofessors.typepad.com/agriculturallaw/2019/04/thrills-with-wills-when-is-a-will-unduly-influenced.html

Heirs Liable for Unpaid Federal Estate Tax 28 Years After Death

https://lawprofessors.typepad.com/agriculturallaw/2019/05/heirs-liable-for-unpaid-federal-estate-tax-28-years-after-death.html

What’s the Best Entity Structure for the Farm or Ranch Business?

https://lawprofessors.typepad.com/agriculturallaw/2019/05/whats-the-best-entity-structure-for-the-farm-or-ranch-business.html

Where Does Life Insurance Fit in an Estate Plan for a Farmer or Rancher?

https://lawprofessors.typepad.com/agriculturallaw/2019/05/where-does-life-insurance-fit-in-an-estate-plan-for-a-farmer-or-rancher.html

Recent Developments in Farm and Ranch Business Planning

https://lawprofessors.typepad.com/agriculturallaw/2019/06/recent-developments-in-farm-and-ranch-business-planning.html

Wayfair Does Not Mean That a State Can Always Tax a Trust Beneficiary

https://lawprofessors.typepad.com/agriculturallaw/2019/06/wayfair-does-not-mean-that-a-state-can-always-tax-a-trust-beneficiary.html

ESOPs and Ag Businesses – Part One

https://lawprofessors.typepad.com/agriculturallaw/2019/07/esops-and-ag-businesses-part-one.html

Issues in Estate Planning – Agents, Promises, and Trustees

https://lawprofessors.typepad.com/agriculturallaw/2019/10/issues-in-estate-planning-agents-promises-and-trustees.html

The Importance of Income Tax Basis “Step-Up” at Death

https://lawprofessors.typepad.com/agriculturallaw/2019/10/the-importance-of-income-tax-basis-step-up-at-death.html

Ag Law in the Courts

            https://lawprofessors.typepad.com/agriculturallaw/2019/11/ag-law-in-the-courts.html

Co-Tenancy or Joint Tenancy – Does it Really Matter?

https://lawprofessors.typepad.com/agriculturallaw/2019/11/co-tenancy-or-joint-tenancy-does-it-really-matter.html

Year-End Legislation Contains Tax Extenders, Repealers, and Modifications to Retirement Provisions

https://lawprofessors.typepad.com/agriculturallaw/2019/12/year-end-legislation-contains-tax-extenders-repealers-and-modification-to-retirement-provisions.html

INCOME TAX

Top 10 Developments in Ag Law and Tax for 2018 – Numbers 10 and 9

https://lawprofessors.typepad.com/agriculturallaw/2019/01/top-10-developments-in-ag-law-and-tax-for-2018-numbers-10-and-9.html

Top Ten Agricultural Law and Tax Developments of 2018 – Numbers 6, 5, and 4

https://lawprofessors.typepad.com/agriculturallaw/2019/01/top-ten-agricultural-law-and-tax-developments-of-2018-numbers-6-5-and-4.html

Top Ten Agricultural Law and Tax Developments of 2018 – Numbers 3, 2, and 1

https://lawprofessors.typepad.com/agriculturallaw/2019/01/top-ten-agricultural-law-and-tax-developments-of-2018-numbers-3-2-and-1.html

Tax Filing Season Update and Summer Seminar!

https://lawprofessors.typepad.com/agriculturallaw/2019/01/tax-filing-season-update-and-summer-seminar.html

QBID Final Regulations on Aggregation and Rents – The Meaning for Farm and Ranch Businesses

https://lawprofessors.typepad.com/agriculturallaw/2019/01/qbid-final-regulations-on-aggregation-and-rents-the-meaning-for-farm-and-ranch-businesses.html

The QBID Final Regulations – The “Rest of the Story”

https://lawprofessors.typepad.com/agriculturallaw/2019/01/the-qbid-final-regulations-the-rest-of-the-story.html

Can a State Tax a Trust with No Contact with the State?

https://lawprofessors.typepad.com/agriculturallaw/2019/02/can-a-state-tax-a-trust-with-no-contact-with-the-state.html

Tax Matters – Where Are We Now?

https://lawprofessors.typepad.com/agriculturallaw/2019/02/tax-matters-where-are-we-now.html

New Developments on Exclusion of Employer-Provided Meals

https://lawprofessors.typepad.com/agriculturallaw/2019/02/new-development-on-exclusion-of-employer-provided-meals.html

Valuing Non-Cash Charitable Gifts

https://lawprofessors.typepad.com/agriculturallaw/2019/03/valuing-non-cash-charitable-gifts.html

Passive Losses and Material Participation

https://lawprofessors.typepad.com/agriculturallaw/2019/03/passive-losses-and-material-participation.html

Passive Losses and Real Estate Professionals

https://lawprofessors.typepad.com/agriculturallaw/2019/03/passive-losses-and-real-estate-professionals.html

Developments in Agricultural Law and Taxation

https://lawprofessors.typepad.com/agriculturallaw/2019/03/developments-in-agricultural-law-and-taxation.html

Real Estate Professionals and Aggregation – The Passive Loss Rules

https://lawprofessors.typepad.com/agriculturallaw/2019/03/real-estate-professionals-and-aggregation-the-passive-loss-rules.html

Sale of the Personal Residence After Death

https://lawprofessors.typepad.com/agriculturallaw/2019/03/sale-of-the-personal-residence-after-death.html

Cost Segregation Study – Do You Need One for Your Farm?

https://lawprofessors.typepad.com/agriculturallaw/2019/03/cost-segregation-study-do-you-need-one-for-your-farm.html

Cost Segregation – Risk and Benefits

https://lawprofessors.typepad.com/agriculturallaw/2019/04/cost-segregation-risks-and-benefits.html

Permanent Conservation Easement Donation Transactions Find Their Way to the IRS “Dirty Dozen” List

https://lawprofessors.typepad.com/agriculturallaw/2019/04/permanent-conservation-easement-donation-transactions-find-their-way-to-the-irs-dirty-dozen-list.html

Self-Rentals and the Passive Loss Rules

https://lawprofessors.typepad.com/agriculturallaw/2019/04/self-rentals-and-the-passive-loss-rules.html

More on Self-Rentals

            https://lawprofessors.typepad.com/agriculturallaw/2019/04/more-on-self-rentals.html

Of Black-Holes, Tax Refunds, and Statutory Construction

https://lawprofessors.typepad.com/agriculturallaw/2019/04/of-black-holes-tax-refunds-and-statutory-construction.html

What Happened in Tax During Tax Season?

https://lawprofessors.typepad.com/agriculturallaw/2019/04/what-happened-in-tax-during-tax-season.html

Cost Segregation and the Recapture Issue

https://lawprofessors.typepad.com/agriculturallaw/2019/06/cost-segregation-and-the-recapture-issue.html

S.E. Tax and Contract Production Income

https://lawprofessors.typepad.com/agriculturallaw/2019/06/se-tax-and-contract-production-income.html

Recent Developments in Farm and Ranch Business Planning

https://lawprofessors.typepad.com/agriculturallaw/2019/06/recent-developments-in-farm-and-ranch-business-planning.html

Ag Cooperatives and the QBID – Initial Guidance

https://lawprofessors.typepad.com/agriculturallaw/2019/06/ag-cooperatives-and-the-qbid-initial-guidance.html

Wayfair Does Not Mean That a State Can Always Tax a Trust Beneficiary

https://lawprofessors.typepad.com/agriculturallaw/2019/06/wayfair-does-not-mean-that-a-state-can-always-tax-a-trust-beneficiary.html

Start Me Up! – Tax Treatment of Start-Up Expenses

https://lawprofessors.typepad.com/agriculturallaw/2019/07/start-me-up-tax-treatment-of-start-up-expenses.html

More on Real Estate Exchanges

https://lawprofessors.typepad.com/agriculturallaw/2019/07/more-on-real-estate-exchanges.html

2019 Tax Planning for Midwest/Great Plains Farmers and Ranchers

https://lawprofessors.typepad.com/agriculturallaw/2019/07/2019-tax-planning-for-midwestgreat-plains-farmers-and-ranchers.html

Tax Treatment of Settlements and Court Judgments

https://lawprofessors.typepad.com/agriculturallaw/2019/07/tax-treatment-of-settlements-and-court-judgments.html

ESOPs and Ag Businesses – Part One

https://lawprofessors.typepad.com/agriculturallaw/2019/07/esops-and-ag-businesses-part-one.html 

Tax “Math” on Jury Verdicts

https://lawprofessors.typepad.com/agriculturallaw/2019/07/tax-math-on-jury-verdicts.html

Kansas Revenue Department Takes Aggressive Position Against Remote Sellers

https://lawprofessors.typepad.com/agriculturallaw/2019/08/kansas-revenue-department-take-aggressive-position-against-remote-sellers.html

Tax-Deferred Exchanges and Conservation Easements

https://lawprofessors.typepad.com/agriculturallaw/2019/08/tax-deferred-exchanges-and-conservation-easements.html

Proper Handling of Breeding Fees

https://lawprofessors.typepad.com/agriculturallaw/2019/08/proper-handling-of-breeding-fees.html

Proper Tax Reporting of Commodity Wages

https://lawprofessors.typepad.com/agriculturallaw/2019/08/proper-tax-reporting-of-commodity-wages.html

Tax Consequences of Forgiving Installment Payment Debt

https://lawprofessors.typepad.com/agriculturallaw/2019/09/tax-consequences-of-forgiving-installment-payment-debt.html

Are Taxes Dischargeable in Bankruptcy?

https://lawprofessors.typepad.com/agriculturallaw/2019/09/are-taxes-dischargeable-in-bankruptcy.html

Ag Law and Tax in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2019/09/ag-law-and-tax-in-the-courts.html

Refund Claim Relief Due to Financial Disability

https://lawprofessors.typepad.com/agriculturallaw/2019/09/refund-claim-relief-due-to-financial-disability.html

Shareholder Loans and S Corporation Stock Basis

https://lawprofessors.typepad.com/agriculturallaw/2019/09/shareholder-loans-and-s-corporation-stock-basis.html

The Family Limited Partnership – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2019/09/the-family-limited-partnership-part-two.html

Hobby Losses Post-2017 and Pre-2026 – The Importance of Establishing a Profit Motive

https://lawprofessors.typepad.com/agriculturallaw/2019/10/hobby-losses-post-2017-and-pre-2026-the-importance-of-establishing-a-profit-motive.html

The Importance of Income Tax Basis “Step-Up” at Death

https://lawprofessors.typepad.com/agriculturallaw/2019/10/the-importance-of-income-tax-basis-step-up-at-death.html

Bad Debt Deduction

            https://lawprofessors.typepad.com/agriculturallaw/2019/10/bad-debt-deduction.html

More on Cost Depletion – Bonus Payments

https://lawprofessors.typepad.com/agriculturallaw/2019/10/more-on-cost-depletion-bonus-payments.html

Recapture – A Dirty Word in the Tax Code Lingo

https://lawprofessors.typepad.com/agriculturallaw/2019/10/recapture-a-dirty-word-in-tax-code-lingo.html

Does the Sale of Farmland Trigger Net Investment Income Tax?

https://lawprofessors.typepad.com/agriculturallaw/2019/10/does-the-sale-of-farmland-trigger-net-investment-income-tax.html

Are Director Fees Subject to Self-Employment Tax?

https://lawprofessors.typepad.com/agriculturallaw/2019/10/are-director-fees-subject-to-self-employment-tax.html

Are Windbreaks Depreciable?

https://lawprofessors.typepad.com/agriculturallaw/2019/11/are-windbreaks-depreciable.html

Tax Issues Associated with Restructuring Credit Lines

https://lawprofessors.typepad.com/agriculturallaw/2019/12/tax-issues-associated-with-restructuring-credit-lines.html

Is a Tenancy-in-Common Interest Eligible for Like-Kind Exchange Treatment?

https://lawprofessors.typepad.com/agriculturallaw/2019/12/is-a-tenancy-in-common-interest-eligible-for-like-kind-exchange-treatment.html

Year-End Legislation Contains Tax Extenders, Repealers, and Modifications to Retirement Provisions

https://lawprofessors.typepad.com/agriculturallaw/2019/12/year-end-legislation-contains-tax-extenders-repealers-and-modification-to-retirement-provisions.html

The “Almost Top Ten” Ag Law and Ag Tax Developments of 2019

https://lawprofessors.typepad.com/agriculturallaw/2019/12/the-almost-top-ten-ag-law-and-ag-tax-developments-of-2019.html

INSURANCE

Prevented Planting Payments – Potential Legal Issues?

https://lawprofessors.typepad.com/agriculturallaw/2019/06/prevented-planting-payments-potential-legal-issues.html

Ag Law in the Courts

            https://lawprofessors.typepad.com/agriculturallaw/2019/11/ag-law-in-the-courts.html

REAL PROPERTY

 Negotiating Cell/Wireless Tower Agreements

https://lawprofessors.typepad.com/agriculturallaw/2019/01/negotiating-cellwireless-tower-agreements.html

Selected Recent Cases Involving Agricultural Law

https://lawprofessors.typepad.com/agriculturallaw/2019/01/selected-recent-cases-involving-agricultural-law.html

The Accommodation Doctrine – More Court Action

https://lawprofessors.typepad.com/agriculturallaw/2019/01/the-accommodation-doctrine-more-court-action.html

Defects in Real Estate Deeds – Will Time Cure All?

https://lawprofessors.typepad.com/agriculturallaw/2019/02/defects-in-real-estate-deeds-will-time-cure-all.html

Is there a Common-Law Right to Hunt (and Fish) Your Own Land?

https://lawprofessors.typepad.com/agriculturallaw/2019/02/is-there-a-common-law-right-to-hunt-and-fish-your-own-land.html

Legal Issues Associated with Abandoned Railways

https://lawprofessors.typepad.com/agriculturallaw/2019/05/legal-issues-associated-with-abandoned-railways.html

Public Trust vs. Private Rights – Where’s the Line?

https://lawprofessors.typepad.com/agriculturallaw/2019/06/public-trust-vs-private-rights-wheres-the-line.html

Ag in the Courtroom

            https://lawprofessors.typepad.com/agriculturallaw/2019/07/ag-in-the-courtroom.html

More on Real Estate Exchanges

https://lawprofessors.typepad.com/agriculturallaw/2019/07/more-on-real-estate-exchanges.html

How Does the Rule Against Perpetuities Apply in the Oil and Gas Context?

https://lawprofessors.typepad.com/agriculturallaw/2019/08/how-does-the-rule-against-perpetuities-apply-in-the-oil-and-gas-context.html

Ag Law in the Courts

            https://lawprofessors.typepad.com/agriculturallaw/2019/10/ag-law-in-the-courts.html

Cost Depletion of Minerals

https://lawprofessors.typepad.com/agriculturallaw/2019/10/cost-depletion-of-minerals.html

Co-Tenancy or Joint Tenancy – Does it Really Matter?

https://lawprofessors.typepad.com/agriculturallaw/2019/11/co-tenancy-or-joint-tenancy-does-it-really-matter.html

“Slip Slidin’ Away” – The Right of Lateral and Subjacent Support

https://lawprofessors.typepad.com/agriculturallaw/2019/12/slip-slidin-away-the-right-of-lateral-and-subjacent-support.html

Is a Tenancy-in-Common Interest Eligible for Like-Kind Exchange Treatment?

https://lawprofessors.typepad.com/agriculturallaw/2019/12/is-a-tenancy-in-common-interest-eligible-for-like-kind-exchange-treatment.html

REGULATORY LAW

Top 10 Developments in Ag Law and Tax for 2018 – Numbers 10 and 9

https://lawprofessors.typepad.com/agriculturallaw/2019/01/top-10-developments-in-ag-law-and-tax-for-2018-numbers-10-and-9.html

Top Ten Agricultural Law and Tax Developments of 2018 – Numbers 6, 5, and 4

https://lawprofessors.typepad.com/agriculturallaw/2019/01/top-ten-agricultural-law-and-tax-developments-of-2018-numbers-6-5-and-4.html

Top Ten Agricultural Law and Tax Developments of 2018 – Numbers 3, 2, and 1

https://lawprofessors.typepad.com/agriculturallaw/2019/01/top-ten-agricultural-law-and-tax-developments-of-2018-numbers-3-2-and-1.html

Is There a Common-Law Right to Hunt (and Fish) Your Own Land?

https://lawprofessors.typepad.com/agriculturallaw/2019/02/is-there-a-common-law-right-to-hunt-and-fish-your-own-land.html

Packers and Stockyards Act – Basic Provisions

https://lawprofessors.typepad.com/agriculturallaw/2019/03/packers-and-stockyards-act-basic-provisions.html

Packers and Stockyards Act Provisions for Unpaid Cash Sellers of Livestock

https://lawprofessors.typepad.com/agriculturallaw/2019/03/packers-and-stockyards-act-provisions-for-unpaid-cash-sellers-of-livestock.html

More Recent Developments in Agricultural Law

https://lawprofessors.typepad.com/agriculturallaw/2019/03/more-recent-developments-in-agricultural-law.html

Ag Antitrust – Is There a Crack in the Wall of the “Mighty-Mighty” (Illinois) Brick House?

https://lawprofessors.typepad.com/agriculturallaw/2019/05/ag-antitrust-is-there-a-crack-in-the-wall-of-the-mighty-mighty-illinois-brick-house.html

Can Foreign Persons/Entities Own U.S. Agricultural Land?

https://lawprofessors.typepad.com/agriculturallaw/2019/05/can-foreign-personsentities-own-us-agricultural-land.html

Prevented Planting Payments – Potential Legal Issues?

https://lawprofessors.typepad.com/agriculturallaw/2019/06/prevented-planting-payments-potential-legal-issues.html

Eminent Domain and Agriculture

https://lawprofessors.typepad.com/agriculturallaw/2019/06/eminent-domain-and-agriculture.html

Classification of Seasonal Ag Workers – Why It Matters

https://lawprofessors.typepad.com/agriculturallaw/2019/06/classification-of-seasonal-ag-workers-why-it-matters.html

Administrative Agency Deference – Little Help for Ag From the Supreme Court

https://lawprofessors.typepad.com/agriculturallaw/2019/06/administrative-agency-deference-little-help-for-ag-from-the-supreme-court.html

Regulation of Food Products

https://lawprofessors.typepad.com/agriculturallaw/2019/07/regulation-of-food-products.html

Ag Legal Issues in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2019/08/ag-legal-issues-in-the-courts.html

Kansas Revenue Department Takes Aggressive Position Against Remote Sellers

https://lawprofessors.typepad.com/agriculturallaw/2019/08/kansas-revenue-department-take-aggressive-position-against-remote-sellers.html

Court Decision Illustrates USDA’s Swampbuster “Incompetence”

https://lawprofessors.typepad.com/agriculturallaw/2019/08/court-decision-illustrates-usdas-swampbuster-incompetence.html

Ag Law and Tax in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2019/09/ag-law-and-tax-in-the-courts.html

Regulatory Takings – Pursuing a Remedy

https://lawprofessors.typepad.com/agriculturallaw/2019/10/regulatory-takings-pursuing-a-remedy.html

The “Almost Top Ten” Ag Law and Ag Tax Developments of 2019

https://lawprofessors.typepad.com/agriculturallaw/2019/12/the-almost-top-ten-ag-law-and-ag-tax-developments-of-2019.html

SECURED TRANSACTIONS

Market Facilitation Program Pledged as Collateral – What are the Rights of a Lender?

https://lawprofessors.typepad.com/agriculturallaw/2019/05/market-facilitation-program-payments-pledged-as-collateral-what-are-the-rights-of-a-lender.html

SEMINARS AND CONFERENCES

Summer 2019 Farm and Ranch Tax and Estate/Business Planning Seminar

https://lawprofessors.typepad.com/agriculturallaw/2019/04/summer-2019-farm-and-ranch-tax-and-estatebusiness-planning-seminar.html

2019 National Ag Tax/Estate and Business Planning Conference in Steamboat Springs!

https://lawprofessors.typepad.com/agriculturallaw/2019/05/2019-national-ag-taxestate-and-business-planning-conference-in-steamboat-springs.html

Summer Tax and Estate Planning Seminar!

https://lawprofessors.typepad.com/agriculturallaw/2019/07/summer-tax-and-estate-planning-seminar.html

2020 National Summer Ag Income Tax/Estate and Business Planning Seminar

https://lawprofessors.typepad.com/agriculturallaw/2019/12/2020-national-summer-ag-income-taxestate-and-business-planning-seminar.html

Fall Seminars

            https://lawprofessors.typepad.com/agriculturallaw/2019/08/fall-seminars.html

WATER LAW

The Accommodation Doctrine – More Court Action

https://lawprofessors.typepad.com/agriculturallaw/2019/01/the-accommodation-doctrine-more-court-action.html

Ag Legal Issues in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2019/08/ag-legal-issues-in-the-courts.html

Ag Law in the Courts

            https://lawprofessors.typepad.com/agriculturallaw/2019/10/ag-law-in-the-courts.html

Regulating Existing Water Rights – How Far Can State Government Go?

https://lawprofessors.typepad.com/agriculturallaw/2019/10/regulating-existing-water-rights-how-far-can-state-government-go.html

The Politics of Prior Appropriation – Is a Senior Right Really Senior?

https://lawprofessors.typepad.com/agriculturallaw/2019/12/the-politics-of-prior-appropriation-is-a-senior-right-really-senior.html

Changing Water Right Usage

https://lawprofessors.typepad.com/agriculturallaw/2019/12/changing-water-right-usage.html

February 28, 2021 in Bankruptcy, Business Planning, Civil Liabilities, Contracts, Cooperatives, Criminal Liabilities, Environmental Law, Estate Planning, Income Tax, Insurance, Real Property, Regulatory Law, Secured Transactions, Water Law | Permalink | Comments (0)

Thursday, February 25, 2021

Ag Zoning Potpourri

Overview

Zoning is largely a local issue.  That means that it is usually a matter of counties and towns to set zoning regulations and local ordinances.  Agricultural often receives favorable treatment – either as being exempt from county-level zoning or receiving a break on property tax, or both.

So, a key question is whether a particular activity constitutes “agriculture” such that the preferential treatment applies.  Likewise, there are many ways that owners of agricultural land can become involved in zoning disputes with respect to activities on that land.

Recent court cases on zoning matters involving agricultural land – it’s the topic of today’s post

Agritourism and Agriculture

Numerous states have enacted agritourism legislation designed to limit landowner liability to those persons engaging in an “agritourism activity.” Generally, the state laws related to agritourism use financial incentives via tax credits or cost-sharing to promote the creation of agritourism activities.  In addition, such state laws also are designed to protect the landowner (commonly defined as a “person who is engaged in the business of farming or ranching and provides one or more agritourism activities, whether or not for compensation”) from liability for injuries to participants or spectators associated with the inherent risks of a covered activity.  Under the Maine statute, for example, inherent risks associated with being on an active farm include hazards from the natural surface and subsurface conditions of land, vegetation, and waters; the behavior of wild and domestic animals; ordinary dangers of structures and equipment used in farming and ranching; and potential injuries caused by the participant’s or others’ failure to follow instructions given or in failing to exercise reasonable caution while engaging in activities.

But, is an agritourism activity “agriculture” for zoning purposes?  To answer the zoning question requires an examination of agritourism state agritourism statutes.  Many state statutes contain language designed to protect the ag real property tax classification.  But, agritourism statutes tend to be written very broadly and can apply to such things as corn mazes, hayrides and even hunting and fishing activities.  For example, in Columbia Township Board of Zoning v. Otis, 663 N.E.2d 377, 104 Ohio App. 3d 756 (Ohio 1995), the court held that haunted hayrides on farm property did not constitute the use of land for agricultural purposes because the addition of a Halloween theme with shrieks and flashing lights was completely inconsistent with traditional agricultural activity.

Also, in Shore v. Maple Lane Farms, LLC, 411 S.W.3d 405 (Tenn. Sup. Ct. 2013)the Tennessee Supreme Court reversed a determination by the court of appeals that music concerts on a farm were within the definition of farm activities within the scope of the agritourism statute and were exempt from a county zoning provision.  The Tennessee Supreme Court said the activity was not “agriculture” as defined by the statute.  Likewise, in Forster v. Town of Henniker, 167 N.H. 745 (2015). the court held that the use of a Christmas tree farm for weddings did not meet the definition of agritourism and, as a result, was not “agriculture” for zoning purposes. 

In another Ohio case decided last year, the court held that weddings and receptions taking place on agriculturally zoned land did not constitute agritourism.  In Lusardi v. Caesarscreek Township Board of Zoning Appeals, No. 2020-CA-8, 2020 Ohio App. LEXIS 3288 (Ohio Ct. App. Sept. 11, 2020), the plaintiffs owned 13.55 acres of farm property that was zoned as agricultural property. The only agricultural activity that the plaintiffs participated in was growing hay. The plaintiffs filed an application to conduct agritourism activities on their property with the defendant, the township board of zoning appeals. The plaintiffs’ application sought to conduct hayrides, corn mazes, and celebratory events, such as agriculturally themed weddings and receptions.

The zoning board granted the plaintiffs application, except for the proposed celebratory events. The zoning board determined that the plaintiffs’ proposed celebratory events did not meet the statutory definition of agritourism. As a result, the plaintiffs filed an administrative appeal at the trial court level. The trial court held that the zoning board’s decision was not arbitrary or capricious, and that the zoning board properly determined that the plaintiffs’ application for celebratory events did not bear a reasonable relationship to agriculture.

At the appellate court, the plaintiffs argued that the trial court failed to construe the statutory definition of agritourism and failed to analyze whether their proposed celebratory events satisfied the definition. The appellate court noted that the trial court was merely required to determine whether the zoning board’s administrative order was arbitrary or capricious. The appellate court also noted that the statute at issue defined agritourism as “an agriculturally-related educational, entertainment, historical, cultural, or recreational activity” conducted on a farm. The appellate court determined that the zoning board had properly concluded that plaintiffs’ proposal was for an event venue with an incidental agricultural theme, rather than an agricultural activity. The appellate court held that just because an activity is done on agriculturally zoned property does not make the activity agritourism. The appellate court declined to categorically decide whether celebratory events constituted agritourism, and only affirmed the zoning board’s decision that the plaintiffs’ proposed celebratory events were not agritourism.

Confined Livestock Operations

Another situation that can create issues with local zoning officials involves confined livestock operations.  Is a large-scale confinement operation “agriculture” or is it more like a commercial business operation?  The issue sometimes arises in counties that exempt agriculture from county zoning and the county attempts to zone the alleged commercial activity.  This issue came up in a recent case.

In Chambers v. Delaware-Muncie Metro. Board. of Zoning Appeals, 150 N.E.3d 603 (Ind. Ct. App. 2020), the petitioners owned property located in an area that was zoned as “agricultural.”  The petitioners sought and eventually obtained a permit from the county building commissioner to build several hog barns configured as a concentrated animal feeding operation (CAFO) on their property. Neighbors of the petitioners asked the zoning board to review the building commissioner’s decision to issue the permit. The zoning board voided the permit and determined that the farming zone did not recognize industrial agricultural uses, such as the petitioners’ proposed CAFO. The petitioners sought a review of the zoning board’s decision.  The trial court noted that the zoning ordinance specifically permitted animal husbandry, as well as raising and selling hogs and the erection of barns and similar farming building.

The trial court determined that the zoning ordinance clearly indicated that hog raising operations were a permitted use. The trial court noted that the county could have excluded CAFOs or put other restrictions in place to maintain more traditional farming operations. Additionally, the trial court noted that several CAFOs were located and permitted in other agricultural zones in the county. Thus, the trial court held that the zoning board’s decision was reversed and the building commissioner’s decision to issue the permit to the petitioners was reinstated.

On appeal, the neighbors of the petitioners argued that the zoning ordinance was ambiguous because it did not mention CAFOs. The appellate court agreed with the trial court and noted that the zoning ordinance set no limit on the scale of permitted uses in the agricultural zone. The appellate court determined that the plain language of the zoning ordinance was not ambiguous, and the petitioners were permitted to raise any number of hogs, subject to state and federal limitations.

Actual Use of the Property

Sometimes change in use of the property from one type of agriculture activity to another type of agricultural activity can become entangled in a zoning dispute.  That was the issue decided by the Tennessee Court of Appeals earlier this month.

In Jefferson Cty. v. Wilmoth Family Properties, LLC, No. E201902283COAR3CV, 2021 Tenn. App. LEXIS  37 (Tenn. Ct. App. Feb. 1, 2021), the defendants purchased a parcel in 2004.  At the time of purchase, the defendants believed that the property was zoned “agriculture” because its prior use had been as a dairy farm and slaughterhouse.  The defendants. The defendants began using the property for hay and chicken production, as well as hosting third party events and overnight stays.  The defendants later discovered that the property was zoned rural residential. In 2016, the county sent notice to defendants to stop using the property as an event venue, claiming that commercial events were prohibited by the rural residential zoning.  The defendants did not comply and the county sued.  The defendants claimed that their property satisfied the statutory definition of a “farming operation” that was protected by the state (TN) Right-To-Farm (RTF) law. 

The trial court agreed with the defendants that the tracts was being used as a farming operation and that the events were a secondary use.  On appeal, the appellate court affirmed.  The appellate court noted that the defendants had sold hay, cattle and poultry products from the property. 

Conclusion

Zoning issues arise often involving rural land use.  What might seem to be an agricultural activity may not be, and non-agricultural events on rural land might be questioned by zoning officials.  Also, being aware of the present (and perhaps planned) zoning status of land before acquiring it is a good idea. 

February 25, 2021 in Real Property | Permalink | Comments (0)