I am preparing my mother's tax return.

[ld948]

I am preparing my mother's tax return.  She owns a farm which she definitely did not ever materially participate in running.  In 2016 she received income on crop shares stored from the previous year and also paid expenses on insurance and taxes.  She also received fixed rental income for the first time in 2016 from renting out the farm land (with no more crop shares).  Does this mixture of incomes mean she needs to file both a form 4835 for the crop shares etc. and a schedule E for the 2016 fixed rental income?

[Cattlerancher · Accepted solution]

Technically yes, but I would be tempted to use just one or the other for this year since she received both in 2016 for this same farm. They are both taxed the same (as rental income on schedule E). If she anticipates cash rental in the future, I would suggest using just schedule E in 2016 and continue with this same rental property in 2017 and on. If there are depreciating farm assets such as buildings or machinery you can use the farm recovery periods on schedule E in Rental Properties. I'll attach a page snip of them which can also be found in IRS publication 225.