What Is Farm Income and Why Is It Important?
Farm or estate is a term used to describe an independent, commercial agricultural establishment that produces or raises cultivated agricultural products for retail or wholesale sale. The word Farm can also mean an agricultural field, particularly one that combines crop cultivation with livestock rearing. The U.S. Department of Agriculture classifies farm and ranch property as follows: farm: An estate, or farm, is defined as the physical structure on which farming or ranching takes place. In most states, except in the few that specifically so designate, a farm or ranch consists of the structures used in and around a farm.
A farm operator who buys low-priced grain or feed and sells it high has a farm, not an estate. If the principal farm operator lives in a farm household income is taxable only to the extent of his income from all sources. A farm operator who lives in a farm household income is taxable only to the extent of his income from all sources. A farm household income can include the income of a tenant, freeholder, or member of a tenants’ association. All incomes are taxable under UBIT (valued in respect of cost) and then capital gains tax. There are some activities that are treated as business expenses and farm expenses are not, as they are generally treated as personal expenses.
Income normally would include the value of the land and all improvements made to it, the rental returns received, plus interest and any applicable tariffs. Any other incomes from the business, such as rent, would normally be included in the gross estate of the farmer. Other incomes such as the fair market value of the agricultural products manufactured from the land would normally be included in the basis for computing the income of the farmer for the year in which the purchase occurs.