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Tax Law (Questions About Taxes)/Question About Form 1099-PATR

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Hello Mr. Stancil,

I have a question about IRS form 1099-PATR. We bought a piece of land, that we do NOT use for farming, ranching, or any other agricultural or business related purpose. We put a mobile home on it, and we live here. We make no income of any kind from this property.

We purchased the property through a "land loan" lender, that sends us the 1099-PATR each year, because they are a cooperative, and we get an annual co-op "patronage" distribution from them. It states on their website that they make "county home loans" so they DO acknowledge that they make "non-farming business" land loans.

I paid taxes on this money last year, but it didn't sit right with me, so I started digging in this year, to better understand the issue. The fact that I am contacting you about this, should indicate that my digging has not lead me to a definitive conclusion.

From what I can find, this is not a cut-and-dried issue, for tax purposes. When trying to use "a popular tax software preparation product," the only options available are to claim this as some kind of farming business income. Also, when attempting to research this on the internet, almost all advice says to claim this as income, on Schedule, C, F, or in some miscellaneous category SOMEWHERE. I HAVE found that, property used for personal purposes, is not subject to tax, as it relates to the 1099-PATR, but this is where the trouble begins.

My main concern, is the definition of "personal property" as used by the IRS. The examples I have seen never have real estate listed, unless it is in reference to rental property, which would generate business income. This, to me, seems to be one more case where the IRS has intentionally made this vague, probably in the hope that people will just pay taxes on the funds, out of fear of an audit. Just my opinion.

I do not believe that we should have to pay taxes on this money, as a farm/business, since we are not neither. We are just home/land owners, generating no income from the land.

Can you please let us know what advice you can give about this?


Thank you, in advance, for any advice you have to offer.

Answer
Dennis,

Thanks for your question.

The general rule is that the dividends shown on the form are reported as income the same way the interest was deducted. In your case, I presume you deducted the interest on Schedule A, so it would be income on the 1040, line 21.

But,  we now get to the Personal property part. This would be more clear if they said personal-use property. Since this is your home and not a business of any sort,it is personal-use property and not taxable income.

Hope thishelps.

John Stancil, CPQ

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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