When is a Farmer Not a Farmer? Tax Court Case Highlights Complexity in Federal Tax Law

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Maryland farmland in Talbot County image by Chesapeake Bay Program via Flickr.com

This post is not legal advice

A group of Maryland farmers recently learned an important lesson, sometimes how a federal tax law defines a “farmer” can have large impacts. Brothers donated a conservation easement on a farm, then sold the property. The brothers then claimed the donation on their taxes. The tax court ruled that the brothers did not qualify as “qualified farmers” who could deduct 100 percent of the contribution because their gross incomes from the farm were less than 50 percent of their total gross incomes. The sale of farmland and the sale of the conservation easement did not count as an activity included in the business of farming. The brothers were limited to a 50 percent of the charitable contribution for the conservation easement. Continue reading