Social Security and Tax Implications of the 1996 FAIR Act for Retired Landlord Income

James L. Novak and Patricia A. Duffy

Review of Agricultural Economics, 1997, vol. 19, issue 2, 281-290

Abstract: From 1987 to 1992, the percentage of all farm operators age fifty-five or older rose from 45% to 55% (Census of Agriculture). Policy and tax considerations have important implications for the income of people in this age group who are either already retired or considering retiring soon. Under the 1996 Federal Agricultural Improvement Reform (FAIR) Act, farm operators and landlords who crop-share farm program acreage can receive program payments. Landlords can potentially capture all these Production Flexibility Contracts (PFC) payments by becoming the operator. Crop production is no longer required in order to receive farm program payments. However, landlords who materially participate or continue to materially participate in the farm operation may see reductions or total elimination of social security benefits and may be liable for self-employment taxes in addition to income taxes. In this study, we examine the effect on income of landlord participation versus nonparticipation in the farming operation.

Date: 1997
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