Generally, cash basis farmers must include proceeds from crop insurance and federal disaster programs in gross income for the tax year during which they receive the payments. IRC § 451(f), however, provides a special deferral provision for insurance proceeds received as a result of “destruction or damage to crops.” Farmers who meet the requirements of the statute may elect to include the proceeds in gross income for the tax year following the destruction or damage. This one-year deferral protects farmers from recognizing excessive income in one year when their regular practice would have been to sell the crop in the following tax year.
The Taxing of Crop Insurance and Disaster Payments
About Swier Law Firm's Agricultural Law Practice Group
Swier Law Firm's Agricultural Law Practice Group handles the following types of agricultural law issues:
- Crop Insurance Disputes
- Business Planning
- Contracts
- Clean Air Act
- Environmental Law
- Estate Planning
- Insurance
- Leases
- Real Estate
- Taxation
- Water Law
- Preparing, Revising and Updating Farm Operation Governance and Compliance Materials, including Bylaws, Committee Charters, and Compliance Policies.
Take a look at our valuable agricultural law books and articles. Our materials are full of tips and advice. All materials are written by the law firm's nationally recognized agricultural law attorneys and provide detailed South Dakota-specific information designed to help anyone with agricultural law issues. You can request your free copy by clicking on the book cover below.
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