Is farm rental income considered earned income?

[Lancer63]

I have an LLC that's sole asset is farmland, and the sole income is rent I collect from my farmer tenant. Is my income considered earned income? And if it is, can I then utilize a Roth IRA ? (I will be under the income maximum for a Roth)

[macuser_22]

No.   Taxable compensation as defined by the IRS for IRA contributions is:

https://www.irs.gov/publications/p590a#en_US_2018_publink1000230355

What Is Compensation?

Generally, compensation is what you earn from working. For a summary of what compensation does and doesn’t include, see Table 1-1. Compensation includes all of the items discussed next (even if you have more than one type).

Wages, salaries, etc.

Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2.

Commissions.

An amount you receive that is a percentage of profits or sales price is compensation.

Self-employment income.

If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of:

• The deduction for contributions made on your behalf to retirement plans, and

• The deduction allowed for the deductible part of your self-employment taxes.

Compensation includes earnings from self-employment even if they aren’t subject to self-employment tax because of your religious beliefs.

Self-employment loss.

If you have a net loss from self-employment, don’t subtract the loss from your salaries or wages when figuring your total compensation.

Alimony and separate maintenance.

For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance.

Nontaxable combat pay.

If you were a member of the U.S. Armed Forces, compensation includes any nontaxable combat pay you received. This amount should be reported in box 12 of your 2018 Form W-2 with code Q.

What Isn’t Compensation?

Compensation doesn’t include any of the following items.

• Earnings and profits from property, such as rental income, interest income, and dividend income.

• Pension or annuity income.

• Deferred compensation received (compensation payments postponed from a past year).

• Income from a partnership for which you don’t provide services that are a material income-producing factor.

• Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b.

• Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs.

[Carl]

and the sole income is rent

That makes it a passive activity. All compensation received by you in any form from your tenant is rental income. For example, if you have an agreement for monetary compensation on a regular basis (month rent paid to you with money) and that agreement includes a percentage of the production, then the FMV of that production given to you as compensation is also passive income and it's FMV is included in the total rents paid.

So if the renter is growing potatoes and as part of the rental agreement provides you with say, 5% of the salable harvest, if the tenant could have sold that 5% for say, $1000 on the open market, then you have to add that value to the total of all rents received.

Please note that you will still report this on SCH F, and not on SCH E.

[Anonymous_]

So this is clear (assuming this is a single-member LLC):

Use Form 4835:  To report farm rental income based on crops or livestock produced by the tenant.

Use Schedule E: To report cash rent received for pasture or farmland based on a flat charge.

Use Schedule F: To report farm income and expenses if you materially participated in the operation or management of the farm.

See https://www.irs.gov/pub/irs-pdf/f4835.pdf