Form 4835 (2019)
Page 3
Lines 3a and 3b. Enter on line 3a the total agricultural
program payments you received. On line 3b, report the
taxable amount. See the instructions for Schedule F
(Form 1040 or 1040-SR), lines 4a and 4b.
Lines 4a through 4c. Report the full amount of
Commodity Credit Corporation (CCC) loans forfeited,
even if you reported the loan proceeds as income. See
the instructions for Schedule F (Form 1040 or 1040-SR),
lines 5a through 5c.
Lines 5a through 5d. In general, you must report crop
insurance proceeds in the year you receive them. Federal
crop disaster payments are treated as crop insurance
proceeds. However, if you use the cash method of
accounting and 2019 was the year of damage, you can
elect to include certain proceeds in income for 2020. To
do this, check the box on line 5c and attach a statement
to your return. See chapter 3 of Pub. 225.
Generally, if you elect to defer any eligible crop
insurance proceeds, you must defer all such crop
insurance proceeds (including federal crop disaster
payments).
For details on how to complete lines 5a through 5d, see
the instructions for Schedule F (Form 1040 or 1040-SR),
lines 6a through 6d.
Line 6. Use this line to report income not shown on lines
1 through 5d. See the instructions for Schedule F (Form
1040 or 1040-SR), line 8.
Part II. Expenses—Farm Rental Property
Capitalizing costs of producing property and
acquiring property for resale. If you produced real or
tangible personal property or acquired property for resale,
certain expenses may have to be included in inventory
costs or capitalized. These expenses include the direct
costs of the property and the share of any indirect costs
allocable to that property. For details and exceptions, see
Capitalizing costs of producing property and acquiring
property for resale in the Instructions for Schedule F
(Form 1040 or 1040-SR).
How to report. Do not reduce your expenses on lines 8
through 30f by the expenses you must capitalize. Instead,
enter the total amount capitalized in parentheses on line
30g. On the line to the left of the line 30g entry space,
enter “263A.”
Line 10. Expenses you paid or incurred for soil and water
conservation, prevention of erosion, or endangered
species recovery can be deducted only if they are
consistent with a conservation plan approved by the
Natural Resources Conservation Service of the
Department of Agriculture or a recovery plan approved
pursuant to the Endangered Species Act of 1973 for the
area in which your land is located. If no plan exists, your
expenses must be consistent with a plan of a comparable
state agency. Your deduction, however, cannot exceed
25% of your gross income from farming. See the
instructions for Schedule F (Form 1040 or 1040-SR), line
12.
Line 12. Enter your depreciation and section 179 expense
deduction. For details, including whether you must file
Form 4562, Depreciation and Amortization, see chapter 7
of Pub. 225 and the Instructions for Form 4562.
Lines 19a and 19b. Your interest expense could be
limited. See the Instructions for Form 8990 for more
information.
The tax treatment of interest expense differs depending
on its type. For example, home mortgage interest and
investment interest are treated differently. You must
allocate (classify) your interest expense so it is deducted
(or capitalized) on the correct line of your tax return and it
gets the right tax treatment. These rules could affect how
much interest you are allowed to deduct on Form 4835.
See the instructions for Schedule F (Form 1040 or
1040-SR), lines 21a and 21b.
Line 22a. If you rented or leased vehicles, machinery, or
equipment, enter on line 22a the business portion of your
rental cost. But if you leased a vehicle for a term of 30
days or more, you may have to reduce your deduction by
an inclusion amount. See Leasing a Car in Pub. 463,
Travel, Gift, and Car Expenses.
Lines 30a through 30g. Enter expenses not listed on
another line. See the instructions for Schedule F (Form
1040 or 1040-SR), lines 32a through 32f. If you are
required to capitalize expenses, see How to report under
Capitalizing costs of producing property and acquiring
property for resale on this page.
Line 31. If you entered capitalized expenses on line 30g,
your total expenses on line 31 will equal the total of lines
8 through 30f reduced by the amount on line 30g.
Line 32. If line 31 is more than line 7, don’t enter your
loss on line 32. If you have a loss, you must apply the
excess business loss rules, the at-risk rules, and the
passive activity loss rules. To apply these rules, follow the
instructions for line 34, the Instructions for Form 8582,
and the Instructions for Form 461. After applying these
rules, the amount of your allowable loss may be smaller
than the amount figured by subtracting line 31 from line 7.
• If line 7 is more than line 31 and you don’t have prior
year unallowed passive activity losses from this activity,
subtract line 31 from line 7. The result is your net farm
rental income.
• If line 7 is more than line 31 and you have prior year
unallowed passive activity losses from this activity, don’t
enter your net farm rental income on line 32 until you have
figured the amount of prior year unallowed passive
activity losses you may claim this year. Use Form 8582 to
figure the amount of prior year unallowed passive activity
losses you may include on line 32. If there is a net loss
after applying the prior year unallowed loss against the
net farm rental income, enter zero on line 32 and enter the
net loss on line 34c. Indicate that you are including prior
year passive activity losses by entering “PAL” on the
dotted line to the left of the entry space for line 32.
Note: You may need to include information from Form
4835 on Form 8582 even if you have a net profit. For
more information, see the Instructions for Form 8582.
Line 34. To determine your deductible loss, you may
need to complete Form 8582 and Form 461 regardless of
whether you checked box 34a or 34b. However, if you
checked box 34b, you must complete Form 6198, At-Risk
Limitations, before you complete Form 8582. See the
instructions for Schedule F (Form 1040 or 1040-SR), line
36.
