Serving Southeastern Minnesota and Western Wisconsin
        (651) 923-4496                        (800) 732-1439

Tuesday, September 30, 2014  
Weather |  Futures |  Market News |  Headline News |  DTN Ag Headlines |  Charts |  Futures Markets |  Options |  Corn News |  Soybeans News |  US Ag News |  Portfolio 
 Red Wing Bids
 Local Grain Bids
 Benson Farm Service Bids
 Agronomy Contacts
 Daily Dairy Report
 Zumbrota Hay Auction
 USDA Reports
 eAgVantage AGP
 eAgVantage WWN
 eAgVantage WWAS
 eAgVantage BFS
 iview Red Wing Grain
 Employee Login
- DTN Headline News
Ask the Taxman by Andy Biebl
Thursday, September 25, 2014 1:00PM CDT

By Andy Biebl
DTN Tax Columnist

DTN Tax Columnist Andy Biebl is a CPA and principal with the accounting firm of CliftonLarsonAllen LLP in New Ulm and Minneapolis, Minn., and a national authority on agricultural taxation. He'll address detailed tax strategies for farm retirement at an Ag Summit workshop in Chicago Dec. 7 To pose questions for upcoming columns, email


Andy, I hate to admit this but my 80-year-old father is a Neanderthal. We have no on-farm successors, so he has an agreement to sell the family farm to a young Amish couple for cash. He is thinking about stuffing all the money in shoe boxes to avoid paying capital gains taxes. Some people have recommended that he just raise the value of his home, so he'd at least qualify for the $500,000 per couple ($250,000 per single person) exemption on a primary residence's capital gains. What should I advise him?


Your dad needs to start watching that new TV series, "Orange is the New Black." If the IRS uncovers this arrangement, it is not the kind of transaction where they will say, "Just pay the taxes you owe us plus a 20% penalty." It's the kind of deal that will get him a hefty civil tax fraud penalty at best, and a stay at the Greybar Hotel for criminal tax fraud at worst. In this day and age of electronic transactions, 1099s and linked data bases, it's insanity to think that a large land transaction could escape tax reporting.

First of all, the young couple will insist on a legal transfer of title. There is a deed to record that is on public record. When the closing does occur, the title company or attorney will file a 1099 tax form to the IRS, which is required on real estate sales transactions. The IRS has sophisticated computer systems cross-checking electronically these days, to make sure people report all income.

Second, if he's selling his primary residence, he can't just attribute the first $500,000 of gain to that instead of the farmland. He can only use the principal residence exclusion up to the value of the residence and related personal use property (such as a garage and adjacent woodland). The value of a person's house is recorded with the county assessor for property tax purposes. Any sale price would have to be within reason of that record. The remainder of the gain, attributable to the farmland, is taxable.

The short story is this: Tell your dad it won't be any fun for you to spend Sundays visiting him at Club Fed. I can understand it is painful for your father to give the federal and state government about 30% of his lifetime gains on farmland. But the capital gain tax is the cheapest rate we have: 20% federal, 3.8% for the new Obamacare net investment income tax, and then probably about another 6% or so to the state (although that last number can be anywhere from 0% to 10%, depending on which state). And if he is really adverse to paying tax, the legal alternative is to trade the land into other real estate. That's probably not a practical alternative at age 80, as there is nothing easier to own than farmland.


Can "prevent plant" insurance payments be applied to the following tax year if that is when you would normally have marketed the grain from those acres?


The USDA website describes Prevented Planting insurance as providing coverage when extreme weather conditions prevent expected plantings. That definition aligns nicely with the tax provision allowing an elective one-year deferral of crop insurance proceeds in Section 451(d). The tax code says that insurance can be deferred if it arises from destruction or damage to crops from weather-related conditions such as drought, flooding or other natural disaster, or the inability to plant crops because of such a natural disaster.

So, you are on solid ground making the deferral election, assuming that you normally would have marketed that majority of that crop in the subsequent year.


Andy, I find your tax advice very helpful. Where can I find past articles that appear on DTN?


DTN archives all my past columns. For paid subscribers, my most recent columns are always posted in TOWN HALL and FARM BUSINESS. Paid online subscribers will find all older columns by going to the NEWS section, clicking on NEWS SEARCH and putting ANDY BIEBL in the key word search.


blog iconDTN Blogs & Forums
DTN Market Matters Blog
Katie Micik
Markets Editor
Tuesday, September 30, 2014 1:10PM CDT
Monday, September 29, 2014 4:23PM CDT
Friday, September 26, 2014 3:34PM CDT
Technically Speaking
Darin Newsom
DTN Senior Analyst
Monday, September 29, 2014 11:22AM CDT
Sunday, September 28, 2014 3:33PM CDT
Sunday, September 28, 2014 2:12PM CDT
Fundamentally Speaking
Joel Karlin
DTN Contributing Analyst
Wednesday, September 24, 2014 6:06PM CDT
Tuesday, September 23, 2014 3:25PM CDT
Monday, September 22, 2014 3:46PM CDT
DTN Ag Policy Blog
Chris Clayton
DTN Ag Policy Editor
Monday, September 29, 2014 4:23PM CDT
Friday, September 26, 2014 1:42AM CDT
Tuesday, September 23, 2014 8:23PM CDT
Minding Ag's Business
Marcia Taylor
DTN Executive Editor
Monday, September 29, 2014 9:49PM CDT
Friday, September 26, 2014 5:29PM CDT
Tuesday, September 23, 2014 4:09PM CDT
DTN Ag Weather Forum
Bryce Anderson
DTN Ag Meteorologist and DTN Analyst
Monday, September 29, 2014 7:55PM CDT
Thursday, September 25, 2014 3:44PM CDT
Tuesday, September 23, 2014 3:29PM CDT
Tuesday, September 30, 2014 7:41PM CDT
Tuesday, September 30, 2014 6:26PM CDT
Tuesday, September 30, 2014 5:31PM CDT
DTN Production Blog
Pam Smith
Crops Technology Editor
Friday, September 19, 2014 7:15PM CDT
Thursday, September 4, 2014 11:19AM CDT
Thursday, August 28, 2014 7:40PM CDT
Harrington's Sort & Cull
John Harrington
DTN Livestock Analyst
Sunday, September 21, 2014 11:59PM CDT
Friday, September 12, 2014 8:08PM CDT
Friday, August 22, 2014 6:26PM CDT
South America Calling
Alastair Stewart
South America Correspondent
Monday, September 29, 2014 9:00PM CDT
Thursday, September 25, 2014 4:31PM CDT
Wednesday, September 24, 2014 9:26PM CDT
An Urban’s Rural View
Urban Lehner
Editor Emeritus
Tuesday, September 30, 2014 11:25AM CDT
Tuesday, September 16, 2014 10:32PM CDT
Thursday, September 11, 2014 12:51AM CDT
Machinery Chatter
Jim Patrico
Progressive Farmer Senior Editor
Tuesday, September 30, 2014 7:28PM CDT
Tuesday, September 16, 2014 4:32PM CDT
Wednesday, September 10, 2014 8:25PM CDT
Canadian Markets
Cliff Jamieson
Canadian Grains Analyst
Monday, September 29, 2014 9:40PM CDT
Friday, September 26, 2014 10:12PM CDT
Thursday, September 25, 2014 10:01PM CDT
Editor’s Notebook
Greg D. Horstmeier
DTN Editor-in-Chief
Wednesday, September 17, 2014 8:32PM CDT
Friday, September 12, 2014 7:13PM CDT
Wednesday, August 27, 2014 6:39PM CDT
Copyright DTN. All rights reserved. Disclaimer.
Powered By DTN