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Publication 225

Chapter 3
Farm Income(p8)


You may receive income from many sources. You must report the income from all the different sources on your tax return, unless it is excluded by law. Where you report the income on your tax return depends on its source.
This chapter discusses farm income you report on Schedule F (Form 1040), Profit or Loss From Farming. For information on where to report other income, see the Instructions for Form 1040, U.S. Individual Income Tax Return.

Accounting method.(p8)

The rules discussed in this chapter assume you use the cash method of accounting. Under the cash method, you generally include an item of income in gross income in the year you receive it. See Cash Method in chapter 2.
If you use an accrual method of accounting, different rules may apply to your situation. See Accrual Method in chapter 2.


Useful items

You may want to see:

 525 Taxable and Nontaxable Income
 550 Investment Income and Expenses
 908 Bankruptcy Tax Guide
 925 Passive Activity and At-Risk Rules
 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments
Form (and Instructions)
 982: Reduction of Tax Attributes Due to Discharge of Indebtedness
 Sch E (Form 1040): Supplemental
Income and Loss

 Sch J (Form 1040): Income Averaging for Farmers and Fishermen
 1099-G: Certain Government Payments
 1099-PATR: Taxable Distributions
Received From Cooperatives

 4797: Sales of Business Property
 4835: Farm Rental Income and

See chapter 16 for information about getting publications and forms.

Schedule F (Form 1040)(p8)

Individuals, trusts, and partnerships report farm income on Schedule F (Form 1040), Profit or Loss From Farming. Use this schedule to figure the net profit or loss from regular farming operations.
Income from farming reported on Schedule F includes amounts you receive from cultivating, operating, or managing a farm for gain or profit, either as owner or tenant. This includes income from operating a stock, dairy, poultry, fish, fruit, or truck farm and income from operating a plantation, ranch, range, or orchard. It also includes income from the sale of crop shares if you materially participate in producing the crop. See Rents (Including Crop Shares), later.
Income received from operating a nursery, which specializes in growing ornamental plants, is considered to be income from farming.
Income reported on Schedule F does not include gains or losses from sales or other dispositions of the following farm assets.
Gains and losses from most dispositions of farm assets are discussed in chapters 8 and 9. Gains and losses from casualties, thefts, and condemnations are discussed in chapter 11.