“Producers whose principal business is farming can postpone reporting these receipts as income for one year for both income and self-employment tax purposes,” Patrick said.
In this scenario, only livestock sales beyond what is normal for each business would qualify for deferral.
Langemeier said one example of this would be a producer who normally farrows and feeds 2,000 pigs each year. Drought, which resulted in a disaster declaration for the county where the hog farm is located, forced the farmer to sell 1,000 pigs as feeder pigs in 2012 instead of feeding them and selling them as market hogs in 2013. The producer’s normal practice is to sell no feeder pigs, so income generated from the sale of the 1,000 head can be deferred until 2013.
If the feeder pigs sold at $35 per head, that means $35,000 of income could be deferred to 2013, he said.
More of Patrick and Langemeier’s comments about tax management can be found in their publication, “Drought, Livestock and Income Taxes,” available for free download via Purdue’s Center for Commercial Agriculture at http://www.agecon.purdue.edu/commercialag/resources/taxmgmt/index.html
More in-depth information about farm income tax management is available in the Internal Revenue Service publication, “The Farmer’s Tax Guide,” found at http://www.irs.gov by searching “Publication 225” in the publication search menu.