If a rancher/farmer has cows that he puts out on shares and gets a share of the calves but doesnt materially participate with them do you report the income on f or 4835?

[ret]

The farmer/rancher is mostly retired and put his cows out on shares. He does no work with them. Do you report the calf shares on f or 4835?

[sjrcpa]

I'd use 4835 if cows count as crops.

[dascpa]

I know nothing about farms but your post says "materially participate with them" [calves]. That sounds kind of perverted to me.  Shouldn't a farm psychologist get involved....... I need Fireball at 9am this morning.

[qbteachmt]

From: https://www.irs.gov/instructions/i1040sf

General Instructions

Other Schedules and Forms You May Have To File

"Form 4835 to report rental income based on crop or livestock shares produced by a tenant if you didn't materially participate in the management or operation of a farm. This income isn't subject to self-employment tax. See Pub. 225."

[sjrcpa]

Thanks @qbteachmt I've had crop shares many times but never livestock shares.

[The_AntiTax_Man]

@ret  It depends upon the facts and circumstances of your taxpayer.  What is his/her level of involvement in the beef enterprise?  What other farming/ranching activities is the taxpayer involved in?  Is there a direct nexus between these other activities? 

If your taxpayer is only doing landlord things, then yes, you can file on Form 4835.  IE: As a landlord he can fix fence and paint buildings but not much beyond that.

Livestock share arrangements were fairly common once-upon-a-time.  Not as common now-a-days, but still can qualify as rental income [Form 4835] if structured properly.  It is up to you to decide.    

[ret]

Thank you for the response. He is mostly retired but still does sell some hay that is reported income on the schedule f. And the cows he owns but they are not on his place and he doesn't do any work at all with the cows just gets a share of the calves. So do you think they could be reported on the 4835?

[The_AntiTax_Man · Accepted solution]

@ret  You will have to make the call based upon all of the facts and circumstances that you can gather from your client.  How are the books kept for the hay farm and for the beef farm? What amount of his time is devoted to each endeavor?  Is there a direct nexus between the hay farm and the beef farm? 

Only you and your client can determine if you can file a Schedule F for the hay farm and a Form 4835 for the beef farm.