Bad news for cash basis farmers who receive crop insurance proceeds. According to the case, the insurance proceeds are taxed up front unless more than 50% of the income from the destroyed or damaged crop would be reported in the following year.
In this case, the farmers typically reported only 35% of the income from their sugar beets in the next year. The Court upheld an IRS ruling from 1974 that set the threshold to delay income tax on the proceeds at 50% (Nelson, 8th Cir.).
Larry Kopsa CPA
