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Tax Law & Charitable Giving - Farm Products

Although Saturday, September 22, was the first day of autumn, yesterday, September 24th, was the day the moon arrived at the spot in the sky 180 degrees opposite to the sun.  From there the full moon (otherwise known as the Harvest Moon) will slowly wane, making this upcoming week rich in moonlight.

Even as this year’s corn crop in Kansas was poor (or in some cases, nonexistent), this time of year still prompts some end-of-the-year tax planning for many farmers, such as buying that new tractor or pre-paying for seed and fertilizer.  However, if a farmer has charitable intent, there is another great strategy from which both they and their favorite charity can benefit.

Direct contributions of farm products (grain, cattle) to charitable organizations is an often-overlooked gifting strategy.  The full market value of an in-kind contribution given directly to the charity can be excluded from Schedule F farm income.  Furthermore, the farmer can still claim the expenses it took to raise the product.  This includes deductions for feed, seed, fertilizer, etc. 

Any charitable deduction still has to make it over the standard deduction floor to be of any tax advantage ($24,000 in 2018 for Married Filing Jointly). Because of this, it may not be the best strategy to sell the crops and then donate cash at the risk of not being able to itemize and deduct the cash contribution. However, if the farmer instead makes a direct gift of farm product inventory, the farmer does not have to claim the sale of the product as income but can still deduct the expenses. 

So when you see this year’s Harvest Moon rising in the sky, be thankful for our farmers and the light that the moon provides. 

The Harvest Moon

Henry Wadsworth Longfellow, 1807 - 1882

It is the Harvest Moon! On gilded vanes

And roofs of villages, on woodland crests

And their aerial neighborhoods of nests

Deserted, on the curtained window-panes

Of rooms where children sleep, on country lanes

And harvest-fields, its mystic splendor rests!

Gone are the birds that were our summer guests,

With the last sheaves return the laboring wains!

All things are symbols: the external shows

Of Nature have their image in the mind,

As flowers and fruits and falling of the leaves;

The song-birds leave us at the summer’s close,

Only the empty nests are left behind,

And pipings of the quail among the sheaves.

Chad Chase, the Classiest of Advisors

*Article amended 10/29/2018 for accuracy.