Donating Wheat


For many cash basis farmers, significant tax savings can be achieved by donating crops grown directly to a charitable organization. Cash charitable contributions are deductible only as an itemized deduction from adjusted gross income which results in reducing federal income tax only. Many farmers do not itemize deductions because the standard deduction has greatly increased over the years. By contributing crops to a charitable organization:

The cash basis farmer avoids including the sale of the cash crop in income.
The cash basis farmer can still deduct the cost of growing the crop, which results in saving self-employment tax, federal income tax and state income tax.

Guidelines for donating wheat

For cash basis operating farmers (individuals) the following would hold true for a donation of wheat, either in the year of production or the year following production.

The value of the donated grain is NOT included on Schedule F.
The expenses related to the production of that grain stay on Schedule F in the year paid.
There is not a charitable deduction for donated grain (Schedule A), because no income is recognized on the donation.
Federal, state and self-employment tax are not paid on the value of the donated grain.

Crop share landlords cannot do this.

Shares of crop are a rental income that must be included in reportable income by the landlord.

A farmer must make a charitable “donation” giving up “dominion and control” in the asset.

The gift should be from unsold crop inventory, with no prior sale commitment made prior to the gift. If there are any loan deficiency payments (LDPs) available, make sure you take those before transferring the grain. A farmer will gift the grain to the KWC Research Foundation and let them decide what to do with it and when to sell it. A letter to the KWC Research Foundation summarizing the source of the gift from the farmer and an acknowledgement of the gift by the KWC Research Foundation should be kept on file. This may be needed to serve as a substitute for a sales receipt in the yield verification process at FSA offices (and crop insurance) on the quantity of gifted grain, since the grain sales documents would not be in the name of the farmer, but rather in the name of the KWC Research Foundation.

The KWC Research Foundation should receive documentation of the grain delivery in the KWC Research Foundation’s name from the elevator. The KWC Research Foundation should be listed as the seller not as a split off the donor’s settlement sheet. After the transfer, the KWC Research Foundation should assume costs of storage, marketing and transportation.

Always consult your professional tax or legal advisors to determine tax implications prior to making a gift of grain. The Kansas Wheat Commission Research Foundation is a 501(c)(3) (pending approval) and recognizes tax deductible gifts to the extent the law allows.

Information Courtesy: Frontier Farm Credit Business Services –