Are you an ag producer interested in supporting the future of rural America? You might find it fitting that your financial support comes from what grows on the land. However, before you take your livestock or grain to the market, and then make a cash contribution, you’ll want to consider the tax benefits of donating commodities before their sale.
A gift of grain or livestock offers several benefits for farmers and ranchers interested in financially supporting the work we do at the Center for Rural Affairs.
When an ag producer transfers ownership of grain or livestock to a qualified charity before that commodity is sold, the producer does not have taxable income from the sale, which can reduce both self-employment and income taxes.
You’re still able to deduct the cost of producing the commodity on your Schedule F. Significant savings may be realized on federal and state income tax and self-employment tax.
When producers make a cash contribution and use it as an itemized deduction, only the income tax is reduced (not self employment tax). Lining up your charitable giving with the right timing and gift format can be key to getting the biggest bang for your buck.
Guidelines to follow
It is important that you speak with your professional tax and/or legal adviser before making a gift of grain or livestock to the Center for Rural Affairs. Specific steps must be followed for the IRS to recognize the transaction as a contribution of grain or livestock, and not a sale followed by a cash contribution.
- The transaction must be well-documented to show the Center for Rural Affairs as the owner of the grain or livestock.
- The Center for Rural Affairs must be in control of the sale.
Steps to take
- Contact us at 402.687.2100 or firstname.lastname@example.org to let us know you are planning to make a gift of grain or livestock.
- Complete the Gift of Grain or Gift of Livestock letter and return to: Center for Rural Affairs, P.O. Box 136, Lyons, NE 68038. We will then send you a completed copy of a letter with Instructions to Grain Buyer or Instructions for Livestock Buyer.
- Best practice is to give the grain or livestock buyer advance notice of your plan. Then, upon delivery of the grain or livestock, inform or remind the buyer of your wishes. Get written documentation (such as a storage receipt) of the portion of your delivery that is in the Center’s name.
- Instruct the elevator or sale barn not to sell the grain or livestock until it is contacted by the Center. Because the Center owns the grain or livestock following your gift, the donor must give up control before the sale.
- Notify the Center for Rural Affairs that the grain is at the elevator or the livestock are at the sale barn. We will then contact the elevator or sale barn to direct the sale and send you an acknowledgment letter for the donation.
- Remind the elevator or sale barn that the check from the donated grain or livestock needs to be addressed and sent to the Center for Rural Affairs.