IRS Rule Will Limit
Ag Tax Deferments

DES MOINES, Iowa —(AP)— An Internal Revenue Service ruling will limit the ability of farmers to defer income taxes by taking delayed payments for the crops they sell, experts say.

The ruling released last month applies to contracts that have allowed farmers to sell their crops in one year and take payment in another year, deferring income and taxes.

The IRS allowed the practice in the past, but now says that farmers using Alternative Minimum Tax rates must report income from commodity sales in the year in which transactions occur.

The Alternative Minimum Tax was created more than 20 years ago to cut down on tax shelters.

The ruling has caused controversy among farmers and grain elevators.

"It seems like every time the IRS is changing their rules, it's in the fourth quarter," said Brad Davis, general manager of the Gold-Eagle Cooperative in Goldfield.

Neil Harl, an Iowa State University economist and attorney, said he is "getting calls left and right" about the issue. He has advised attorneys to tell farm clients with a contract involving deferred payment to follow through on it "and take your lumps."

Two bills have been introduced in Congress to undo the ruling, but won't be acted on until at least next year, Harl said.