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Discussion Forum Index --> Tax Questions --> Tobacco Quota Buy-Out
Oldman (talk|edits) said:
| 16 March 2006
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| If a tobacco farmer was meted a quota when they first stated this whole thing or bought quota from another farmer doesn't he have a basis in the quota. And isn't this the same as buying stocks or bonds for future gain/dividend income subject to the capital gains tax? The farmer wasn't able to expense the purchase of said quota or depreciate it. Why has the IRS said that the proceeds are to be treated as income on schedule "F"? Did the farmer raise anything or buy anything for resale? I guess we put htis as other income?
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Dennis (talk|edits) said:
| 16 March 2006
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| Basis in rights tend to be amortized.
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Sw (talk|edits) said:
| 16 March 2006
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| OK, Farmer will get a 1099-S this is for the tobacco quota, this is a capital gain, goes on Form 6252 installment sales. He receives 1 payment a year for 10 years. Don't forget about the imputed interest. It on the 1099-S. If he was a grower or tobacco was grown on him farm, he will also get a 1099-G. This will either go on Sch F or Form 4835 depending on if he actually grew the tobacco or was just the landlord. If on Sch F and profit he will also have to pay social security.
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Sw (talk|edits) said:
| 16 March 2006
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| Oh sorry, You also asked about the basic. Unless it was received by grant form FSA before 1938 you have a basic. But figuring it out will be complicated if received as part of a farm purchase, you need historical data. If it was purchase from another farmer that part is easy,that is your cost for that quota. There is a very good quide that is from University of Ky that is directed to tax preparers you can find it of web FSA site. I think this is the correct web site www.uky.edu/Ag/TobaccoEcon/taxinfo.html
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