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Video examines tax options for ag producers in financial distress

ST. PAUL, Minn. (02/12/2016)— University of Minnesota Extension has created a 10-part video series on the basics of taxation in agriculture, discussing the impact of farm liquidation, debt forgiveness and bankruptcy on farm taxes.

We anticipate 2015 will be the third consecutive year that Minnesota farmers experience low net farm income due to poor commodity prices and a high cost structure. This downturn has led to financial stress in the agricultural community.

Most farm operating loans are renewed in March. As renewal time approaches, producers need to be aware of all options if they find themselves in financial difficulty. They may need to liquidate some assets, restructure existing debt, or possibly restructure the entire business to maintain financing for the operation.

“It is very important for producers to understand some of the basics of farm taxation in order to successfully negotiate with lenders,” said Rob Holcomb, Extension educator in agricultural business management.

From 2003 through 2012, production agriculture experienced high profitability. During this time, many producers deferred sales and increased expenses in order to defer federal and state tax liability. A deferred tax liability is the amount of tax that the producer would owe if the operation was liquidated today. According to the University of Minnesota farm financial database (FINBIN), in 2000, the average deferred tax liability for Minnesota farmers was $87,000. In 2014 that deferred tax liability had swelled to over $283,000. This growth is a result of a number of factors, including increased land prices, increased levels of prepaid expenses and deferred commodity sales.

The video series begins with a basic discussion of how everything is taxed in the farming operation. The videos also address the sale and taxation of depreciable and non-depreciable assets, installment sales, cancellation of debt and bankruptcy.

“When dealing with farm financial stress, the manager with good data for his or her operation combined with a tax and financial management skill set is well equipped to make quality management decisions,” Holcomb said.

The video is available here:


Media Contact: Allison Sandve, U of M Extension, (612) 626-4077,

U of M Extension Ag News Wire is a service of University of Minnesota Extension, Communications, 240 Coffey Hall, 1420 Eckles Ave., St. Paul, MN 55113.
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