Form 4835 Farm Rental Income and Expenses

Form

4835

Department of the Treasury
Internal Revenue Service (99)

Farm Rental Income and Expenses

OMB No. 1545-0074

2010

(Crop and Livestock Shares (Not Cash) Received by Landowner (or Sub-Lessor))
(Income not subject to self-employment tax)

▶

Attach to Form 1040 or Form 1040NR.

▶

Attachment
Sequence No. 37
Your social security number

See instructions on page 3.

Name(s) shown on tax return

Employer ID number (EIN), if any

A

Did you actively participate in the operation of this farm during 2010 (see instructions)? .

Part I
1
2a
3a
4
a
b
5
a
c
6
7

Chemicals . . . . . . .
Conservation expenses (see
instructions) . . . . . .

11
12

Custom hire (machine work) .
Depreciation and section 179
expense deduction not
claimed elsewhere . . . .

13

Employee benefit programs other
than on line 21 (see Schedule F
(Form 1040) instructions). . .

Feed . . . . . . . .
Fertilizers and lime . . . .
Freight and trucking . . .
Gasoline, fuel, and oil . . .
Insurance (other than health).
Interest:
a Mortgage (paid to banks, etc.)
b Other . . . . . . . .
20
Labor hired (less employment
credits) (see Schedule F (Form
1040) instructions) . . . .

21
8
9
10
11

12

13
14
15
16
17
18
19a
19b

20

Pension and profitsharing plans . .

c

.

.

Yes

No

1
2b
3b
4a
4c
5b
5d
6
7

.

22
a

Rent or lease:
Vehicles, machinery, and
equipment (see
instructions) . . . .

b
23
24
25
26
27
28
29

Other (land, animals, etc.)
Repairs and maintenance
Seeds and plants . .
Storage and warehousing
Supplies . . . . .
Taxes . . . . . .
Utilities . . . . .
Veterinary, breeding,
and medicine . . .
Other expenses
(specify):

30

22a
22b
23
24
25
26
27
28
29

30a
30b
30c
30d
30e
30f
30g

You may have to complete Form 8582 to determine your deductible loss, regardless of which
box you checked (see instructions). If you checked box 33b, you must complete Form 6198
before going to Form 8582. In either case, enter the deductible loss here and on Schedule E
(Form 1040), line 40 . . . . . . . . . . . . . . . . . . . . . . . .

For Paperwork Reduction Act Notice, see your tax return instructions.

21

a
b
c
d
e
f
g

Total expenses. Add lines 8 through 30g (see instructions) . . . . . . . . . . . ▶
Net farm rental income or (loss). Subtract line 31 from line 7. If the result is income, enter it
here and on Schedule E (Form 1040), line 40. If the result is a loss, you must go to line 33 .
If line 32 is a loss, check the box that describes your investment in this activity
(see instructions) . . . . . . . . . . . . . . . . . . . . . . . . .

33

.

Expenses—Farm Rental Property. Do not include personal or living expenses.

9
10

31
32

.

Gross Farm Rental Income—Based on Production. Include amounts converted to cash or the equivalent.

Car and truck expenses (see
Schedule F (Form 1040)
instructions). Also attach Form 4562

14
15
16
17
18
19

.

Income from production of livestock, produce, grains, and other crops . . . . . . . .
2b Taxable amount
Cooperative distributions (Form(s) 1099-PATR)
2a
3b Taxable amount
Agricultural program payments (see instructions) 3a
Commodity Credit Corporation (CCC) loans (see instructions):
CCC loans reported under election . . . . . . . . . . . . . . . . . . .
4c Taxable amount
CCC loans forfeited . . . . . . . .
4b
Crop insurance proceeds and federal crop disaster payments (see instructions):
5b Taxable amount
Amount received in 2010 . . . . . . .
5a
▶
5d Amount deferred from 2009
If election to defer to 2011 is attached, check here
Other income, including federal and state gasoline or fuel tax credit or refund (see instructions)
Gross farm rental income. Add amounts in the right column for lines 1 through 6. Enter the
total here and on Schedule E (Form 1040), line 42. . . . . . . . . . . . . . . ▶

Part II
8

.

Cat. No. 13117W

31

}

32
33a
33b

All investment is at risk.
Some investment is not at risk.

33c
Form 4835 (2010)

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Page 3

Form 4835 (2010)

General Instructions
What's New
Increase in section 179 expense. You may now deduct
up to $500,000 of the cost of section 179 property placed
in service in 2010. This deduction is phased out if the
cost of the property exceeds $2,000,000. The cost of
certain qualified real property placed in service in 2010
may also be deducted but is limited to $250,000. For
more details, see Pub. 946.
Extension of special allowance. The special first-year
depreciation allowance has been extended to property
placed in service in 2010. See Pub. 946 for details on
which property is eligible for the special allowance.
Increased deduction for 2010 start-up costs. If your
farm business began in 2010, you can deduct up to
$5,000 of certain business start-up costs paid or incurred
after October 22, 2004, in tax years before 2010, and up
to $10,000 of certain business costs paid or incurred in
2010. See the instructions for Schedule F (Form 1040) for
more details.
Excess farm losses. If you received certain subsidies in
2010, your farm rental losses may be reduced or
eliminated. See page 4 and the Instructions for Schedule
F (Form 1040) for more details.

Purpose of Form
If you were the landowner (or sub-lessor) and did not
materially participate (for self-employment tax purposes)
in the operation or management of the farm, use Form
4835 to report farm rental income based on crops or
livestock produced by the tenant. See chapter 12 in Pub.
225, Farmer’s Tax Guide, for the definition of material
participation for landlords.
Use this form only if the activity was a rental activity for
purposes of the passive activity loss limitations. See the
Instructions for Form 8582, Passive Activity Loss
Limitations, for the definition of “rental activity.”
If you have net income on line 32, your tax may be less
if you figure it using Schedule J (Form 1040).
Do not use Form 4835 if you were a/an:
• Tenant—instead use Schedule F (Form 1040) to report
farm income and expenses;
• Landowner (or sub-lessor) and materially participated in
the operation or management of the farm—instead use
Schedule F (Form 1040) to report farm income and
expenses;
• Landowner (or sub-lessor) and received cash rent for
pasture or farmland based on a flat charge—instead
report as income on Schedule E (Form 1040), Part I;
• Estate or trust with rental income and expenses from crop
and livestock shares—instead report on Schedule E (Form
1040), Part I; or
• Partnership or S corporation with rental income and
expenses from crop and livestock shares—instead report
on Form 8825.

Qualified joint ventures. If you and your spouse each
materially participated as the only members of a jointly
owned and operated farm rental business, and you filed a
joint return for the tax year, you can make an election to
be taxed as a qualified joint venture instead of a
partnership. This election in most cases will not increase
the total tax owed on the joint return, but it does give
each of you credit for social security earnings on which
retirement benefits are based and for Medicare coverage
without filing a partnership return.
If you and your spouse make the election and you did
not materially participate (for self-employment tax
purposes) in the operation or management of the farm,
but maintained the farm as a rental business, you each
can file a separate Form 4835 to report your share of farm
rental income based on crops or livestock produced by
the tenant. If you and your spouse did materially
participate (for self-employment tax purposes) in the
operation or management of the farm, you each must file
a separate Schedule F (Form 1040). For an explanation of
“material participation,” see the instructions for Schedule
C (Form 1040), line G. For more information, see
Husband-Wife Qualified Joint Venture in the instructions
for Schedule C (Form 1040).
Additional information. See the Instructions for
Schedule F (Form 1040) and Pub. 225 for more
information.

Specific Instructions
Employer ID number (EIN). You need an EIN only if you
had a qualified retirement plan or were required to file an
employment, excise, estate, trust, partnership, or alcohol,
tobacco, and firearms tax return. If you need an EIN, see
the Instructions for Form SS-4.
Line A. Generally, you are considered to actively
participate if you participated in making management
decisions or arranging for others to provide services
(such as repairs) in a significant and bona fide sense.
Management decisions that are relevant in this context
include approving new tenants, deciding on rental terms,
approving capital or repair expenditures, and other similar
decisions. You do not, however, actively participate if at
any time during the year your interest (including your
spouse’s interest) in the activity was less than 10% (by
value) of all interests in the activity.

Part I. Gross Farm Rental Income—Based on
Production
Line 1. Report income you received from livestock,
produce, grains, and other crops based on production.
Under both the cash and the accrual methods of
accounting, you must report livestock or crop share
rentals received in the year you convert them into money
or its equivalent.
Lines 2a and 2b. Enter on line 2a your total distributions
from cooperatives as shown on Form 1099-PATR, Taxable
Distributions Received From Cooperatives. On line 2b report
the taxable amount. See the instructions for Schedule F
(Form 1040), lines 5a and 5b.

Form 4835 (2010)

Lines 3a and 3b. Enter on line 3a the total agricultural
program payments you received. On line 3b report the
taxable amount. See the instructions for Schedule F
(Form 1040), lines 6a and 6b.
Lines 4a through 4c. Report the full amount of CCC
loans forfeited, even if you reported the loan proceeds as
income. See the instructions for Schedule F (Form 1040),
lines 7a through 7c.
Lines 5a through 5d. In general, you must report crop
insurance proceeds in the year you receive them. Federal
crop disaster payments are treated as crop insurance
proceeds. However, if you use the cash method of
accounting and 2010 was the year of damage, you can
elect to include certain proceeds in income for 2011. To do
this, check the box on line 5c and attach a statement to
your return. See chapter 3 of Pub. 225.
Generally, if you elect to defer any eligible crop
insurance proceeds, you must defer all such crop
insurance proceeds (including federal crop disaster
payments).
For details on how to complete lines 5a through 5d, see
the instructions for Schedule F (Form 1040), lines 8a
through 8d.
Line 6. Use this line to report income not shown on lines
1 through 5d. See the instructions for Schedule F (Form
1040), line 10.

Part II. Expenses—Farm Rental Property
Capitalizing costs of property. If you produced real or
tangible personal property or acquired property for resale,
certain expenses may have to be included in inventory
costs or capitalized. These expenses include the direct
costs of the property and the share of any indirect costs
allocable to that property. For details and exceptions, see
Capitalizing costs of property in the instructions for
Schedule F (Form 1040).
How to report. Do not reduce your expenses on lines 8
through 30f by the expenses you must capitalize. Instead,
enter the total amount capitalized in parentheses on line
30g. On the line to the left of the line 30g entry space,
enter “263A.”
Line 10. Expenses you paid or incurred for soil and water
conservation, prevention of erosion, or endangered species
recovery can be deducted only if they are consistent with a
conservation plan approved by the Natural Resources
Conservation Service of the Department of Agriculture or a
recovery plan approved pursuant to the Endangered
Species Act of 1973 for the area in which your land is
located. If no plan exists, your expenses must be consistent
with a plan of a comparable state agency. See the
instructions for Schedule F (Form 1040), line 14.
Line 12. Enter your depreciation and section 179 expense
deduction. For details, including whether you must file
Form 4562, Depreciation and Amortization, see Pub. 225,
chapter 7, and the Instructions for Form 4562.

Page 4

Lines 19a and 19b. The tax treatment of interest expense
differs depending on its type. For example, home
mortgage interest and investment interest are treated
differently. You must allocate (classify) your interest
expense so it is deducted (or capitalized) on the correct
line of your tax return and it gets the right tax treatment.
These rules could affect how much interest you are
allowed to deduct on Form 4835. See the instructions for
Schedule F (Form 1040), lines 23a and 23b.
Line 22a. If you rented or leased vehicles, machinery, or
equipment, enter on line 22a the business portion of your
rental cost. But if you leased a vehicle for a term of 30 days
or more, you may have to reduce your deduction by an
inclusion amount. See Leasing a Car in Pub. 463, Travel,
Entertainment, Gifts, and Car Expenses.
Lines 30a through 30g. Enter expenses not listed on
another line. See the instructions for Schedule F (Form
1040), lines 34a through 34f. If you are required to
capitalize expenses, see How to report under Capitalizing
costs of property on this page.
Line 31. If you entered capitalized expenses on line 30g,
your total expenses on line 31 will equal the total of lines
8 through 30f reduced by the amount on line 30g.
Line 33. Your farm rental losses may be reduced or
eliminated if you received certain subsidies in 2010. See
page F-7 of the instructions for Schedule F (Form 1040) for
a list of those subsidies. If the excess farm loss rules
apply, use one of the worksheets in the Schedule F (Form
1040) instructions to determine if you have an excess farm
loss. See the Instructions for Schedule F (Form 1040) for
more details on how to complete the worksheets.
To determine your deductible loss, you may need to
complete Form 8582. However, if you checked box 33b,
you must complete Form 6198, At-Risk Limitations, before
you complete Form 8582. See the instructions for
Schedule F (Form 1040), line 37.
Do not complete Form 8582 if either of the following
applies.
• You meet all of the conditions listed under Exception for
Certain Rental Real Estate Activities in the instructions for
Schedule E (Form 1040). Instead, enter your deductible
loss on line 33c and on Schedule E (Form 1040), line 40.
• You were a real estate professional (as defined in the
instructions for Schedule E (Form 1040)) and you
materially participated in the operation of this activity
(under the passive loss rules). See the Instructions for
Form 8582 for the definition of material participation. Your
loss is not subject to the passive activity loss limitations.
Instead, enter your deductible loss on line 33c and on
Schedule E (Form 1040), line 40. Also, include the loss in
the total for Schedule E (Form 1040), line 43.