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taxmap/pubs/p225-005.htm#en_us_publink1000217705

Chapter 3
Farm Income(p8)

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Farm Income


What's New(p8)


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Exclusion extended on qualified principal residence debt.(p8)

You can exclude from income a canceled debt that is qualified principal residence debt. The exclusion has been extended through 2012. The amount excluded from income is applied to reduce (but not below zero) the basis of your principal residence. See Qualified Principal Residence Debt, later.
taxmap/pubs/p225-005.htm#en_us_publink1000217708

Exclude from income payments under Federal Health Protection Program (FHPP).(p8)

Payments received under the FHPP are excluded from income. These are payments received from the Department of Agriculture for an integrated pest management strategy to protect forest, trees, and woods.
taxmap/pubs/p225-005.htm#en_us_publink1000217709

Election to defer income from debt cancellation.(p8)

You can elect to defer income from the cancellation of certain business debt. See Cancellation of Debt for more information.

taxmap/pubs/p225-005.htm#TXMP6eccb2efIntroduction

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). For information on where to report other income, see the Instructions for Form 1040.
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Accounting method.(p8)


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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.

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Useful items

You may want to see:


Publication
 525 Taxable and Nontaxable Income
 550 Investment Income and Expenses
 908 Bankruptcy Tax Guide
 925 Passive Activity and At-Risk Rules
Form (and Instructions)
 Sch E (Form 1040): Supplemental 
Income and Loss

 Sch F (Form 1040): Profit or Loss From Farming
 Sch J (Form 1040): Income Averaging for Farmers and Fishermen
 982: Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)
 1099-G: Certain Government Payments
 1099-PATR: Taxable Distributions 
Received From Cooperatives

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

See chapter 16 for information about getting publications and forms.
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Schedule F(p8)


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Schedule F

Report your farm income on Schedule F (Form 1040). Use this schedule to figure the net profit or loss from regular farming operations.
Income from farming reported on Schedule F (Form 1040) 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.