topic Re: passive or active participation in Business & farm

passive or active participation

mrjj84 — Mon, 09 Mar 2026 08:14:10 GMT

I own farmland and it is lease on cash basis. We maintain the wood lots around the field to make sure the field is clear branches and downed for the farmer and also maintain an access lane. I collect the rent, price insurance, and make any major decision. What type of participation would this be considered passive or active.

Re: passive or active participation

squamby — Sat, 12 Mar 2022 21:42:10 GMT

I don't know the answer, but I'm dumbfounded that people would still report cash income to the Feds, unless of course, someone paying cash is also handing you a 1099 statement.

Re: passive or active participation

mrjj84 — Sat, 12 Mar 2022 21:51:13 GMT

I have a 1099 Misc for the rent.

Re: passive or active participation

PattiF — Sat, 12 Mar 2022 21:54:53 GMT

The rental income is passive and would be reported on a Schedule E.

Cash rent landlords may generally deduct the cost of ordinary and necessary expenses relating to the production of the rental income. These expenses might include taxes, interest, repairs, insurance, management fees, agents' commissions, and depreciation. Rental income, however, is passive income.

See Tax Implications of a Farmland Lease from Iowa State.

Re: passive or active participation

Rick19744 — Sat, 12 Mar 2022 22:34:55 GMT

@squamby it is because that is the law and our tax system is based on trust and reporting within the scope of the tax laws.

Are there wealthy individuals that don't report properly; most definitely, but that doesn't make it right.

Then if you are audited and an agent attempts to reconcile your living style to what is being reported and then looks at your bank records. Will you then lie if asked if you ever were paid in cash?

Penalties for those caught are not worth it.

Not a stellar standard.