Tax Webinar for Farmers and Farmland Owners

by Barry Ward, OSU Extension, Director, OSU Income Tax Schools

Are you getting the most from your tax return? Farmers and farmland owners that wish to increase their tax knowledge should consider this webinar that will address tax issues important to them. Mark your calendars for January 29th, 2018 to participate in this 2 hour webinar from 10 am to noon.

The webinar, which focuses on tax issues specific to farmers and farmland owners will offer insight into topics such as new and proposed tax legislation as well as buying and selling farmland.

OSU Income Tax Schools which are a part of OSU Extension and the College of Food, Agricultural and Environmental Sciences will offer this webinar on January 29th from 10-noon.

The two-hour program, which will be presented in a live webinar format, is targeted towards farmers and farmland owners who file their own farm taxes or simply wish to arm themselves with more tax information that will help them to better plan for tax filing.

Topics to be discussed during the webinar include:

  • New and Proposed Tax Legislation
  • Ag Income and Expenses
  • Net Operating Losses
  • Buying and Selling Farmland
  • Rental Property
  • Demolition of Structures

The cost for the webinar is $35. To register for this live webinar, go to https://farmoffice.osu.edu/osu-income-tax-schools

Registration will be open on December 15th.

The OSU Income Tax School Program is a part of OSU Extension and the College of Food, Agricultural, and Environmental Sciences at The Ohio State University.

Agricultural Tax Issues Webinar

by Barry Ward, OSU Extension, Director, OSU Income Tax Schools

Tax practitioners, farmers, land owners are encouraged to attend the Ag and Natural Resources Income Tax Issues Webinar on December 18 from 9:00 a.m. to 3:00 p.m. The event is sponsored by Ohio State University Extension and participants can attend the webinar at host locations throughout Ohio.

The webinar, which will focus on issues specific to farm tax returns related to agriculture and natural resources, will offer insight into topics such as net operating losses and buying and selling farmland.

The six-hour program will be presented in a live webinar format. Tax preparers, as well as individuals who file their own farm taxes are invited to attend.

The program is an intermediate-level course and our target audience is tax preparers whose clients include farmers and rural landowners. Farmers who prepare and file their own taxes will also benefit from the webinar.

Topics to be discussed during the webinar include:

  • Agricultural Income and Expenses
  • Net Operating Losses
  • Transfer of Farm Assets
  • Buying and Selling Farmland
  • Rental Property
  • Farm Employees
  • Self-Employment Tax and Social Security Benefits

The cost for the one-day school is $130, and applications have been made for the following continuing education credits:

  • Accountancy Board of Ohio, CPAs (6 hours)
  • Office of Professional Responsibility, IRS (6 hours)
  • Supreme Court of Ohio, Attorneys (5 hours)

Registration includes the Agricultural Tax Issues book. The deadline to register is Dec. 11 to make sure participants will receive the workbook in the mail before the workshop. The live webinar, which will also feature a real-time Q-and-A, can be viewed at several host locations statewide and will include lunch.

Participants also have the option to view the webinar from home if unable to attend a host location.

For those who choose not to attend at a host location, a web address for the webinar will be sent if registered a week in advance of the Dec. 18 presentation. However, all participants must be registered by Dec. 11 if they want to be sure they receive the workbook before the webinar.

Host locations include:

Auglaize County, OSU Extension Office, 208 S. Blackhoof St., Wapakoneta

Clermont County, OSU Extension Office, 1000 Locust St., Owensville

Fairfield County, OSU Extension Office, 831 College Ave., Lancaster

Miami County, OSU Extension Office, 201 W. Main St., Old Courthouse, Troy

Noble County, OSU Extension South Central Region Office, 16714 Wolf Run Road, Caldwell

Putnam County, OSU Extension Office, 1206 E. Second St., Ottawa

Wayne County, Fisher Auditorium, 1680 Madison Ave., Wooster

Wyandot County, Elks Lodge, 320 E. Wyandot Ave., Upper Sandusky

More information on the workshop, including how to register, can be found at go.osu.edu/AgIssuesReg. For more information contact Barry Ward at 614-688-3959 or ward.8@osu.edu

Sharpen Management Skills through Farm Management School

by: Amanda Douridas: Extension Educator

Managing your farm business is always important but the difference in just doing it and doing it well can be big during challenging times. When commodity prices are down, it is crucial to understand your balance sheet, maintain a good relationship with your lender and carefully consider budgets for next year. These topics will be covered during a 5 night Farm Management School in Urbana, Ohio beginning in December.

During the first session, learn how to properly complete your end of year balance sheet from Greg Knight with Civista Bank and Chris Bruynis, OSU Extension, will provide tips on tax issues that make the most sense for your farm business. During the next session, a panel of agricultural lenders will talk about what they would like to see from farmers before making a loan and will answer questions from the participants.

Legal issues can be very specific to agriculture and also very complicated. Peggy Kirk Hall, OSU Extension Agricultural Law Specialist, will discuss the legal issues that are most important to the class. Another complicated issue that can be difficult to make a decision on is healthcare. The fourth session will focus on the issues farmers face with healthcare and a healthcare professional will cover any changes and updates to the current system.

Lastly, Barry Ward, OSU Extension, will talk about commodity budgets for 2018 and take a look at cash flow to help you prepare for the 2018 season.

The session dates are Dec 6, 20, and Jan 3, 17 and 31. They begin at 5:30 pm with dinner and the program will run 6-8:00 pm. The cost to attend is $50 per farm and RSVPs are due Nov 27. Class space is limited so register early. Download the registration flyer at http://go.osu.edu/agevents. Childcare is available for $10 for the first child and $5 for each additional per night due day of. For questions about the program or to register with a credit card, please contact Amanda Douridas at 937-484-1526 or douridas.9@osu.edu.

2017 Tax Outlook- The Truth is in the Detail

By David Marrison, Extension Educator

With all the changes in Washington, we at OSU Extension have gotten a lot of questions on what may be in store for tax reform n 2017?   Most of the experts are saying we will see the most comprehensive tax reform since the tax reforms of 1986 by President Ronald Reagan.

Some of these proposed tax changes could happen while others will just be fodder for talk shows and columns like this one.  Given the shift of control to the Republican side of the aisle, it is wise to look at the “A Better Way” report released by Speaker Paul Ryan last summer for some potential tax reforms.  For those who want more insight, the complete report can be found at: http://abetterway.speaker.gov/_assets/pdf/ABetterWay-Tax-PolicyPaper.pdf.

So let’s peak into the crystal ball…..

Estate Tax- At the beginning of January, House Resolution 198 titled the “Death Tax Repeal Act of 2017” was introduced into Congress and it currently sits in the Ways & Means Committee (https://www.congress.gov/bill/115th-congress/house-bill/198).  This bill is seeking to eliminate the federal estate tax.  This is one area where I caution us to be careful of what you wish for!  On the outside this may look like a good move but in the long run it could mean higher taxes for farmers and small businesses.

Currently, Americans can pass on $5,490,000 to their heir(s) tax free when they die.  The federal estate tax law also includes portability to a spouse which essentially means as a couple we can pass on a combined $10.98 million tax free to our heirs.  Even better, Ohio, led by Governor Kasich, repealed the Ohio Estate tax in 2013. So, if your estate is less than $5.49 million as an individual or $10.98 million as a married couple you should have very little concern in this area.  And given that less than 0.2 percent of all estates are subject to federal estate tax each year, should this really be on the chopping block?

So what am I concerned about?  The introduced bill has very little in the way of detail.  And the detail will be important.  One item that could disappear if the estate tax is eliminated is the ability for heirs to “step-up” the value of the inherited assets to its current market value at death.  This could be a significant loss to most farming operations.

Again, the detail in the Repeal Act will be important.  It has been suggested a complete repeal of the estate tax could pave way for a capital gains tax collection at death.  So imagine your heirs having to pay a 20% capital gain tax on the assets from your estate when you die.  For a $2.5 million dollar farm in Ohio, this would mean $500,000 in taxes versus $0 under our current system.  Ouch!  Be careful what you wish for as the truth will be in the detail!  We need to know what a repeal of the federal estate tax actually means.

Complete Expensing of Equipment & Buildings- The administration is also advocating for businesses to be able to completely write-off the expense of any building or equipment in the year of its purchase instead of recovering its value through a depreciation schedule.  This too could have some unattended consequences.  Again, the truth will be in the detail.

I think it matters very little on how we recapture the cost of these purchases. We have used Accelerated Bonus Depreciation and Section 179 for fifteen years to recapture the cost of capital purchases quicker.  My main concern is that complete expensing could cause a Net Operating Loss.  This could lead to the farm family not paying anything into Social Security and Medicare or at such a low level that it would affect their retirement years.  So while it may look good in the short term, without changes to how we pay into Social Security, it could lead to farmers not having enough eligible quarters to retire or be covered under Medicare.  Again, be careful for what you wish for as the truth will be in the detail.

Border Adjustment Tax (BAT)- There has been a lot of chatter on the potential impact of implementing a border adjustment tax or BAT.  This tax would be a huge change in the way we do business as Americans.  Currently, products shipped overseas bear the cost of income tax where imported products don’t.  In short, it could be considered a tariff without being called such.  It would be a huge revenue source for the government and would promote domestic production.  It is similar to the Value Added Tax used by many of our trading partners. The BAT along coupled with the proposed reductions in the tax rates for businesses should be a major catalyst for businesses here in the United States.

So, how will the BAT impact agriculture?  More specifically, how will it affect our trade relations especially with the top three international buyers of agricultural exports- Canada, China, and Mexico?   I think most sectors of the economy will be weighing in on the BAT issue.  Many retailers are very opposed to a border tax as a large percentage of the products they sell are imported.  For agriculture, it is anticipated it would add 10-15% to some of the costs of our inputs such as diesel fuel and to other inputs such as fertilizer and equipment.  The BAT debate is going to be fascinating to watch.  Make sure to keep asking your legislators how it will impact agriculture!

Summary- My recommendation is not to fall asleep on policy and tax reform in 2017.  Be engaged, ask questions and ask how it will impact your operation and our entire industry in the short term as well as long term.

 

Ohio Legislature is Set to Reconsider CAUV Bill

Written by:  Chris Hogan, Law Fellow, OSU Agricultural & Resource Law Program

The Ohio Legislature is once again considering a bill regarding Ohio’s current agricultural use valuation (CAUV) program. CAUV permits land to be valued at its agricultural value rather than the land’s market or “highest and best use” value. Senator Cliff Hite (R-Findlay) introduced SB 36 on February 7, 2017. The bill would alter the capitalization rate used to calculate agricultural land value and the valuation of land used for conservation practices or programs. The bill has yet to be assigned to a committee.

The content of SB 36 closely mirrors the language of a bill meant to address CAUV from the last legislative session: SB 246. Introduced during the 131st General Assembly, SB 246 failed to pass into law. SB 246 proposed alterations to the CAUV formula which are identical to those proposed by the current bill: SB 36. According to the Ohio Legislative Service Commission’s report on SB 246, the bill would have proposed changes that would have led to a “downward effect on the taxable value of CAUV farmland.” The likely effect for Ohio farmers enrolled in CAUV would have been a lower tax bill.

Due to the similarity between the two bills, the potential impacts of SB 36 on the CAUV program will likely be comparable to those of the previous bill. The proposed adjustment of the capitalization rate is likely to reduce the tax bill for farmers enrolled in CAUV. More specifically, the bill proposes several changes to the CAUV formula:

  • States additional factors to include in the rules that prescribe CAUV calculation methods. Currently, the rules must consider the productivity of the soil under normal management practices, the average price patterns of the crops and products produced to determine the income potential to be capitalized and the market value of the land for agricultural use. The proposed legislation adds two new factors: typical cropping and land use patterns and typical production costs.
  • Clarifies that when determining the capitalization rate used in the CAUV formula, the tax commissioner cannot use a method that includes the buildup of equity or appreciation.
  • Requires the tax commissioner to add a tax additur to the overall capitalization rate, and that the sum of the capitalization rate and tax additur “shall represent as nearly as possible the rate of return a prudent investor would expect from an average or typical farm in this state considering only agricultural factors.”
  • Requires the commissioner to annually determine the overall capitalization rate, tax additur, agricultural land capitalization rate and the individual components used in computing those amounts and to publish the amounts with the annual publication of the per-acre agricultural use values for each soil type.

To remove disincentives for landowners who engage in conservation practices yet pay CAUV taxes at the same rate as if the land was in production, the proposed legislation:

  • Requires that the land in conservation practices or devoted to a land retirement or conservation program as of the first day of a tax year be valued at the lowest valued of all soil types listed in the tax commissioner’s annual publication of per-acre agricultural use values for each soil type in the state.
  • Provides for recalculation of the CAUV rate if the land ceases to be used for conservation within three years of its original certification for the reduced rate, and requires the auditor to levy a charge for the difference on the landowner who ceased the conservation practice or participation in the conservation program.

To read SB 36, visit this page. For more information on previous CAUV bills, see our previous blog post.

 

Employers Must Use New 1-9 Form Beginning January 22, 2017

by Peggy Hall

Beginning January 22, 2017, employers must use a new version of Form I-9 for employment eligibility verification of new hires.  The U.S. Citizenship and Immigration Services (USCIS) revised Form I-9  last November and gave employers a short grace period for making the conversion to the new form, dated 11/14/16.  The new form is available on the USCIS website at https://www.uscis.gov/i-9.

Employers will  notice several improvements to the new I-9:

  • The instructions are now separate from the form and include specific guidance on each section.
  • The form is much more computer-friendly, with drop-down lists, calendars, on screen prompts and instructions for each field, a “start over” button and easy access to full instructions.
  • The employer may now list more than one preparer and translator who assisted in completion of the form.
  • In the first section, the employer must list only “other last names used” rather than “other names used.”
  • A new “additional information” box provides space for the employer to note important information for the employer’s purposes such as additional documents presented, employee termination dates or form retention dates.

Employers must complete a Form I-9 to verify the identity and employment authorization of every individual hired for employment.  For more information, see our previous post on Form I-9, and visit the USCIS’s “I-9 Central” at https://www.uscis.gov/i-9-central.

 

New Deadline for Reporting Non-Employee Compensation on Form 1099

By: David Marrison, Associate Professor & Extension Educator

There is a new change from the Internal Review Service which farmers need to be aware of in regards to the Form 1099. New this year is a provision that if the Form 1099s is being issued to report “Non-Employee Compensation” it is due both to the recipient and to the IRS by January 31, 2017.   The recipient due date has always been January 31, but taxpayers usually had until February 28 or in the case of e-filed returns March 31 to file with the IRS.  However, this is no longer true for those receiving a 1099 for non-employee compensation.  They are due to both by January 31 with no extensions.

A Form 1099 for “non-employee compensation” is generally required if the total payments for services exceeds $600 during the calendar year. Examples of this could be for hiring a neighboring farmer to harvest, spray, or plant your crops.  It could also include hiring a professional such as an accountant or veterinarian.  Reporting is needed for payments made to unincorporated businesses (ie. sole proprietorship or LLC) in excess of $600.  Generally payments to a corporation do not require a 1099 to be issued or payments made to LLC which have elected to be taxed as a corporation.  One exception that should be noted is that payments over $600 to an attorney, regardless of business entity (corporation or unincorporated), need to have a Form 1099-MISC issued.

Form 1099s are also used for report rent paid to landlords, royalty payments from gas wells, and for reporting crop insurance proceeds. For 1099s issued for these other reasons, they still must be to the recipient by January 31 but remain under the old filing deadline to the IRS of February 28 or in the case of e-filed returns March 31.  However, it is recommended that you file all of your Form 1099s at the same time.  This way you don’t forget to file the other forms by the later due date!

It is highly recommended that farmers obtain a Form W-9 from each business they purchase products and services from. This form provides the necessary information that allows you to process the Form 1099. Don’t guess on if the entity is a corporation or not.  The W-9 will indicate the type of entity.  You do not need to get a new Form W-9 each year, but it is a good idea to get them updated annually if you can.

It should be noted that payments paid for products do not require a Form 1099 to be filed. Therefore, when farmers buy fertilizer or feed, they are not required to issue a Form 1099.  However, if services are provided along with a product (ie. you hire for the spraying and the entity provides the spray chemicals) then a Form 1099 is required and the form should include the total payment made.

More information about 1099 reporting can be obtained at the Internal Revenue Systems website at: https://www.irs.gov/uac/about-form-1099misc.  And just a friendly reminder, if you miss the deadline or do not issue Form 1099s that are required, the penalty for EACH form 1099 not timely filed is $250 for not sending to the recipient and $250 for not filing with the IRS.

Click here to access the form 1099: https://www.irs.gov/pub/irs-pdf/f1099msc.pdf.

USDA Makes it Easier to Transfer Land to the Next Generation of Farmers and Ranchers

DES MOINES, Iowa, Dec. 29, 2016 – Agriculture Deputy Under Secretary Lanon Baccam today announced that beginning Jan. 9, 2017, the U.S. Department of Agriculture (USDA) will offer an early termination opportunity for certain Conservation Reserve Program (CRP) contracts, making it easier to transfer property to the next generation of farmers and ranchers, including family members. The land that is eligible for the early termination is among the least environmentally sensitive land enrolled in CRP.

This change to the CRP program is just one of many that USDA has implemented based on recommendations from the Land Tenure Advisory Subcommittee formed by Agriculture Secretary Tom Vilsack in 2015. The subcommittee was asked to identify ways the department could use or modify its programs, regulations, and practices to address the challenges of beginning farmers and ranchers in their access to land, capital and technical assistance.

“The average age of principal farm operators is 58,” said Baccam.  “So, land tenure, succession and estate planning, and access to land is an increasingly important issue for the future of agriculture and a priority for USDA. Access to land remains the biggest barrier for beginning farmers and ranchers.  This announcement is part of our efforts to address some of the challenges with transitioning land to beginning farmers.”

Baccam made the announcement while touring the Joe Dunn farm in Warren County, located in central Iowa near Carlisle. Dunn is the father-in-law to Iowa native and former Marine Aaron White, who with his wife, are prospective candidates for the early termination program.  Baccam was joined by Farm Service Agency Iowa State Executive Director John Whitaker when meeting with Dunn and White.

“The chance to give young farmers a better opportunity to succeed when starting a farming career makes perfect sense,” said Baccam. “There are Conservation Reserve Program acres that are rested and ready to be productive, an original goal of CRP. The technical teams at USDA will tell us which ones can terminate from the program with little impact on the overall conservation efforts. When they do, we’ll be ready to help beginning farmers like military veteran Aaron White.”

Normally if a landowner terminates a CRP contract early, they are required to repay all previous payments plus interest.  The new policy waives this repayment if the land is transferred to a beginning farmer or rancher through a sale or lease with an option to buy.  With CRP enrollment close to the Congressionally-mandated cap of 24 million acres, the early termination will also allow USDA to enroll other land with higher conservation value elsewhere.

“Starting the next generation of farmers and ranchers out with conservation and stewardship in mind is another important part of this announcement,” Baccam said.  “The land coming out of CRP will have priority enrollment opportunities with USDA’s working lands conservation programs through cooperation between the Farm Service Agency and the Natural Resources Conservation Service.”

Acres terminated early from CRP under these land tenure provisions will be eligible for priority enrollment consideration into the CRP Grasslands, if eligible; or the Conservation Stewardship Program or Environmental Quality Incentives Program, as determined by the Natural Resources Conservation Service.

According to the Tenure, Ownership and Transition of Agricultural Land survey, conducted by USDA in 2014, U.S. farmland owners expect to transfer 93 million acres to new ownership during 2015-2019. This represents 10 percent of all farmland across the nation. Details on the early termination opportunity will be available starting on Jan. 9, 2017, at local USDA service centers. For more information about CRP and to find out if your acreage is eligible for early contract termination, contact your local Farm Service Agency (FSA) office or go online at www.fsa.usda.gov/crp. To locate your local FSA office, visit http://offices.usda.gov/.

Since 2009, USDA has invested more than $29 billion to help producers make conservation improvements, working with as many as 500,000 farmers, ranchers and landowners to protect over 400 million acres nationwide, boosting soil and air quality, cleaning and conserving water and enhancing wildlife habitat. For an interactive look at USDA’s work in conservation and forestry over the course of this Administration, visit http://medium.com/usda-results.

Western Ohio 2017 Agriculture Outlook Meeting

by Sam Custer, Extension Educator

What does 2017 look like for Western Ohio farmers and agricultural businesses?

Learn what to expect this year during an agricultural outlook meeting February 3 at noon presented by agriculture economists and swine specialist with the College of Food, Agricultural, and Environmental Sciences at The Ohio State University.

The presentation is part of the 2017 Agricultural Policy and Outlook series offered by The Ohio State University Extension, the outreach arm of the college. The meeting is being hosted by the Agriculture and Natural Resources Educators from Auglaize, Darke, Miami, Mecer and Shelby Counties.

The meeting is partially sponsored by Farm Credit Mid America Merchants Bank of Indiana, Minster Bank, Second National Bank, The Andersons and Ohio’s Country Journal and Ohio Ag Net.

The meeting will feature presentations on matters the agricultural community should expect in 2017, including policy changes, key issues and market behavior with respect to farm, food and energy resources, and the environment, said Sam Custer, OSU Extension, Darke County Educator.

“Participants can listen and learn from Ohio State faculty as they discuss the opportunities and challenges for the agricultural sector as well as interpret the impact of recent policy decisions,” Custer said.

Speakers for the outlook meeting are:

Dale Richer, State Swine Specialist, OSU Extension

Carl Zulauf, Professor Emeritus, Ohio State University

Barry Ward, Asst. Professor, OSU Extension, Production Business Management

David Marrison, Assoc. Professor, OSU Extension

What we’ll cover:

  • Ohio Swine Production Update
  • Speculation on President Trump’s Policy Agenda
  • Examining Land Values, Cash Rents, Input Costs & Potential Crop Profitability in 2017
  • What Are Grain Markets Telling Us?
  • Farm & Estate Tax Laws – Planning for an Uncertain Future

“These presentations will provide excellent information and insights that will benefit farmers and agricultural leaders as they make plans for 2017 and beyond,” Custer said.

The meeting will be held at the Romer’s Party Room, 118 East Main Street, Greenville, Ohio.

Registration for the meeting is $20 (includes lunch) by January 27.  A registration flyer can be downloaded at http://go.osu.edu/2017darkeagoutlook.

For more information about the meeting, contact Custer at custer.2@osu.edu or 937.548.5215.

 

For more detailed information, visit the Darke County OSU Extension web site at www.darke.osu.edu, the OSU Extension Darke County Facebook page.

Final Repair Regulations Add Another Tax Management Tool for Farmers

by: Barry Ward, Leader, Production Business Management & Director, OSU Income Tax Schools – Ohio State University Extension

Edited material from the “National Income Tax Workbook 2016”, Land Grant University Tax Education Foundation Inc.

The final tangible property (property that can be felt or touched) regulations affect all taxpayers who acquire, produce, or improve tangible property. The regulations clarify whether costs are currently deductible or whether the taxpayer must capitalize and depreciate the costs. The final regulations are generally effective for tax years beginning on or after January 1, 2014.

The final repair regulations include a de minimis (the law/IRS does not concern itself with anything under this amount) safe harbor that allows taxpayers to elect to deduct the cost of tangible property, rather than recover­ing the cost through depreciation expense. The de minimis safe harbor increases a farm client’s ability to expense the purchase cost of livestock and small equipment.

Under the Treas. Reg. § 1.263(a)-1(f)(1) de minimis safe harbor, a taxpayer can take a current-year deduction (when the cost is paid or incurred) for the acquisition or production of units of tangible property that cost less than a specified amount, even if the taxpayer would normally have to capitalize the cost, or deduct the amount paid when the property is first used or consumed in the business. Thus, a farm client may be able to deduct otherwise capitalizable expenditures under the safe harbor. However, for a farmer who intends to later sell the property at a gain, electing the de minimis safe harbor may increase the tax owed on the later sale.

Although the taxpayer’s accounting pro­cedures can set any dollar limit for expensing amounts, the per-item tax deduction is limited to $2,500 for taxpayers without an applicable finan­cial statement (AFS) and $5,000 for taxpayers with an AFS. Therefore, if the accounting procedure sets a threshold that exceeds $2,500 ($5,000 for taxpayers with an AFS), only the items that cost $2,500 ($5,000) or less qualify for the safe harbor. This activity will likely trigger extra IRS scrutiny. For farmers, the safe harbor is particularly useful to expense small equipment and livestock held for productive use, such as animals held for dairy or breeding.

When a taxpayer properly applies the de minimis safe harbor, the amount paid is not treated as a capital expenditure or as materials and supplies. Instead, the taxpayer deducts the amount under Treas. Reg. § 1.162-1, provided the expense otherwise constitutes an ordinary and necessary business expense. If the items to be deducted don’t have an applicable expense line on Schedule F, they can be listed as “Other expenses”.

Any subsequent gain on disposition of the property is ordinary income, so in some situations, it may be prefer­able to not elect to expense the property under the de minimis safe harbor.

Property expensed under the de minimis safe harbor is not I.R.C.§ 1231 property, and the tax­payer must report the sale on Form 4797, Sales of Business Property, Part II, as ordinary income. The income from the sale does not meet the test for self-employment income and, even though it is ordinary income, the taxpayer does not report the income on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship), or Schedule F (Form 1040), Profit of Loss From Farming, where it would be subject to self-employment (SE) tax.