In late 1995, the U.S. Tax Court shocked farmers and their tax advisors with the startling news that a non-material participation crop share lease of 731 acres of land to a family partnership (in which the Arkansas landowner was a 25 percent partner) produced self-employment tax liability on the share rents paid to the landowner. Now, an IRS private letter ruling has reached the same conclusion under a different factual situation. The growing body of authority supporting the IRS position has fueled an already burgeoning level of audit activity in the area and promises to produce a pronounced shift in estate and business planning strategies for farmers and ranchers.



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