A farmer’s gift of crops could generate substantial tax advantages compared to traditional types of charitable donations using cash or check gifts.
Southwest Farm Press reports that a gift of crops, with a value of $5,000, might offer the following advantages:
• The value of the donated crops is not included on Schedule F.
• The expenses associated with the production of the donated crops are deductible on Schedule F.
• There are no federal or state income taxes paid on the value of the donated crops.
• There is no self-employment tax paid on the value of the donated crops.
• Yield records are not affected by the donation.
With crop donations, tax savings from the donated crops will still exist even if the farmer chooses to itemize deductions for the year or claim the standard deduction on his 2014 taxes. Donating crops under the Tax Code is for the farmer to ensure that full “dominion and control” over the crops donated is relinquished. Full relinquishment of dominion and control is an essential element of a gift for tax purposes.
Farmers facing a higher-income 2014 in need of tax-saving strategies should consult their tax advisor on the use of the donated crop strategy because of the significant tax savings that can result. Proper advice is essential on meeting the dominion and control relinquishment requirement and its documentation.