Instructions For Form 4835 - 2006
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12
Form 4835 (2006)
Page
treatment. These rules could affect how much
General Instructions
instructions for Schedule F, lines 7a through 7c,
on page F-3.
interest you are allowed to deduct on Form
4835. See the instructions for Schedule F,
Purpose of form. If you were the landowner
Lines 5a through 5d. In general, you must
lines 23a and 23b, on page F-5.
(or sub-lessor) and did not materially
report crop insurance proceeds in the year
participate in the operation or management of
Line 22a. If you rented or leased vehicles,
you receive them. Federal crop disaster
the farm, use Form 4835 to report farm rental
machinery, or equipment, enter on line 22a
payments are treated as crop insurance
income based on crops or livestock produced
the business portion of your rental cost. But if
proceeds. However, if you use the cash
by the tenant.
you leased a vehicle for a term of 30 days or
method of accounting and 2006 was the year
more, you may have to reduce your
Use this form only if the activity was a
of damage, you can elect to include certain
deduction by an inclusion amount. See
rental activity for purposes of the passive
proceeds in income for 2007. To do this,
Leasing a Car in Pub. 463.
activity loss limitations. See the Instructions
check the box on line 5c and attach a
for Form 8582, Passive Activity Loss
statement to your return. See Pub. 225.
Lines 30a through 30g. Enter expenses not
Limitations, for the definition of “rental
listed on another line. See the instructions for
Generally, if you elect to defer any eligible
activity.”
Schedule F, lines 34a through 34f, on page
crop insurance proceeds, you must defer all
F-6. If you are required to capitalize
If you were a tenant, use Schedule F (Form
such crop insurance proceeds (including
expenses, see How to report under
1040) to report farm income and expenses.
federal crop disaster payments).
Capitalizing costs of property.
If you were a landowner (or sub-lessor) do
For details on how to complete lines
not use this form to report cash rent received
5a through 5d, see the instructions for
Line 31. If you have entered capitalized
for pasture or farmland if the amount is based
Schedule F, lines 8a through 8d, on page F-3.
preproductive expenses on line 30g, your
on a flat charge. Report this income directly
total expenses on line 31 will equal the total
Line 6. Use this line to report income not
on Schedule E (Form 1040).
of lines 8 through 30f reduced by the amount
shown on lines 1 through 5d. See the
on line 30g.
If you have net income on line 32, your tax
instructions for Schedule F, line 10, on
may be less if you figure it using Schedule J
page F-3.
Line 33. To determine your deductible loss,
(Form 1040).
you may need to complete Form 8582.
Part II. Expenses—Farm Rental
However, if you checked box 33b, you must
Additional information. For more
Property
complete Form 6198, At-Risk Limitations,
information, including the definition of material
before you complete Form 8582. See the
participation, see the instructions for
Capitalizing costs of property. If you
instructions for Schedule F, line 37, that begin
Schedule F and Pub. 225, Farmer’s Tax
produced real or tangible personal property or
on page F-6.
Guide.
acquired property for resale, certain expenses
Do not complete Form 8582 if either of the
may have to be included in inventory costs or
Specific Instructions
following applies.
capitalized. These expenses include the direct
You meet all three of the conditions listed
costs of the property and the share of any
Employer ID number. You need an employer
under Exception for Certain Rental Real
indirect costs allocable to that property.
identification number (EIN) only if you had a
Estate Activities in the instructions for
However, these rules generally do not apply
qualified retirement plan or were required to
Schedule E on page E-2. Instead, enter your
to expenses of:
file an employment, excise, estate, trust,
deductible loss on line 33c and on Schedule
Producing any plant that has a
partnership, or alcohol, tobacco, and firearms
E, line 40.
tax return. If you need an EIN, see the
preproductive period of 2 years or less,
You were a real estate professional (as
Instructions for Form SS-4.
Raising animals, or
defined in the instructions for Schedule E on
Line A. Generally, you are considered to
Replanting certain crops if they were lost or
page E-1) and you materially participated in
actively participate if you participated in
damaged by reason of freezing temperatures,
the operation of this activity (under the
making management decisions or arranging
disease, drought, pests, or casualty.
passive loss rules). See the Instructions for
for others to provide services (such as
But you may be able to currently deduct
Form 8582 for the definition of material
repairs) in a significant and bona fide sense.
rather than capitalize the expenses of
participation. Your loss is not subject to the
Management decisions that are relevant in
producing a plant with a preproductive period
passive activity loss limitations. Instead, enter
this context include approving new tenants,
of more than 2 years. See Election to deduct
your deductible loss on line 33c and on
deciding on rental terms, approving capital or
certain preproductive period expenses in the
Schedule E, line 40. Also, include the loss in
repair expenditures, and other similar
instructions for Schedule F on page F-4.
the total for Schedule E, line 43.
decisions. You do not, however, actively
How to report. Do not reduce your expenses
participate if at any time during the year your
Paperwork Reduction Act Notice. We ask
on lines 8 through 30f by the preproductive
interest (including your spouse’s interest) in
period expenses you must capitalize. Instead,
for the information on this form to carry out
the activity was less than 10% (by value) of
enter the total amount capitalized in
the Internal Revenue laws of the United
all interests in the activity.
States. You are required to give us the
parentheses on line 30g. On the line to the
left of the line 30g entry space, enter “263A.”
information. We need it to ensure that you are
Part I. Gross Farm Rental
complying with these laws and to allow us to
Income—Based on Production
Line 10. Expenses you paid or incurred for
figure and collect the right amount of tax.
soil and water conservation can be deducted
Line 1. Report income you received from
You are not required to provide the
only if they are consistent with a conservation
livestock, produce, grains, and other crops
information requested on a form that is
plan approved by the Natural Resources
based on production. Under both the cash
subject to the Paperwork Reduction Act
Conservation Service of the Department of
and the accrual methods of reporting, you
unless the form displays a valid OMB control
Agriculture for the area in which your land is
must report livestock or crop share rentals
number. Books or records relating to a form
located. If no plan exists, your expenses must
received in the year you convert them into
or its instructions must be retained as long as
be consistent with a soil conservation plan of
money or its equivalent.
their contents may become material in the
a comparable state agency. See the
administration of any Internal Revenue law.
instructions for Schedule F, line 14, on
Lines 2a and 2b. Enter on line 2a your total
Generally, tax returns and return information
page F-4.
distributions from cooperatives as shown on
are confidential, as required by Internal
Form 1099-PATR, Taxable Distributions
Line 12. Enter your depreciation and
Revenue Code section 6103.
Received From Cooperatives. On line 2b
section 179 expense deduction. For details,
report the taxable amount. See the
The average time and expenses required to
including whether you must file Form 4562,
instructions for Schedule F, lines 5a and 5b,
complete and file this form will vary
Depreciation and Amortization, see the
on page F-2.
depending on individual circumstances. For
instructions for Schedule C (Form 1040), line
the estimated averages, see the instructions
13, on page C-4.
Lines 3a and 3b. Enter on line 3a the total
for your income tax return.
agricultural program payments you received.
Lines 19a and 19b. The tax treatment of
On line 3b report the taxable amount. See the
If you have suggestions for making this
interest expense differs depending on its
instructions for Schedule F, lines 6a and 6b,
form simpler, we would be happy to hear
type. For example, home mortgage interest
on page F-3.
from you. See the instructions for your
and investment interest are treated differently.
income tax return.
You must allocate (classify) your interest
Lines 4a through 4c. Report the full amount
expense so it is deducted on the correct line
of CCC loans forfeited, even if you reported
of your tax return and it gets the right tax
the loan proceeds as income. See the
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