What Is A Crop Share Agreement
Throughout the year, I receive calls from producers and landowners about a fair rent for the country that is in possession or what is rented. The commonality of these appeals is that they either want to get a fair rent or pay a fair rent. In this article, I will discuss cultural action leases. The traditional share regime for grain harvesting, such as corn or wheat, is one-third for the landowner and two-thirds for the tenant. As a general rule, the expenses paid and the harvests obtained correspond to the share, that is, the landowner would bear one third of the expenses and receive one third of the harvest. For hay fruit, the proportion is generally divided 50/50. The tax treatment of income received by a lessor under a plant-based lease depends largely on the amount of the lessor`s participation in agricultural activities governed by the lease. Where the lessor participates “substantially” in the lease, all income from the lease is subject to self-employment tax. The lessor will report revenues and expenses on Schedule F, IRS Form 1040. If the lessor is not involved materially, the income is not subject to the self-employment tax and the lessor will report income and expenses on Form IRS 4835.
All losses or losses are transferred to Schedule E, form IRS 1040. As a general rule, a lease is taxable, unless it is expressly exempted under Part I of Schedule V of the Excise Act, which could apply in limited situations, such as real estate, which is intended for long-term stay. The rent paid as a portion of the crop is not subject to the HST. The treatment of cash rents for HST purposes may also depend on the landlord`s total income. A business (including a renter who leases real estate) does not need to register to collect and transfer HST if its gross tax and zero rating sales are less than $30,000. Landlords whose only source of business income is rent with rental incomes of less than $30,000, do not need to register when they can choose to do so. The most effective lease for plant units is structured to reward both parties for the value of the contributions paid.