Is a farm reported on Form 4835 a trade or business for Section 199A?

[itonewbie · Accepted solution]

The definition of §162 trade or business didn't change with §199A.  Activities conducted in relation to the trade or business must still be regular, continuous, and substantial.  Activities that are normally associated with investments are generally discounted.

It does sound like your client has some involvement with the tenant but your question to your client would be the level, regularity, and nature of those involvements.  He doesn't need to be personally involved in farming but if he (and/or his employees, agents, and independent contracts) spends a substantial amount of time regularly and continuously on the management and/or oversight of the farmland and the various systems in place, there may be a case that the venture could be a qualified trade or business or that it meets the safe harbor rules.

[sjrcpa]

if all client does is collect their share, I think No.

[dlcoatscpa]

That's where I am struggling.  He travels to the farm frequently, pays all the bills, and helps make decisions regarding crops, but just doesn't do the actual farming.