Farm Income Tax Management and Reporting Manual

Abstract

The 1988 Tax Bill (TAMRA 1988) was passed by Congress on October 22 and signed by President Reagan on November 11. What began as a Technical Corrections Bill more than one year ago developed into an important revenue bill that will increase taxes $4.1 billion over a three year period. The new law affects tax reporting beginning in 1989 but some changes are retroactive to 1988 and even to 1987. Here are some of the major changes included in TAMRA 1988 that will affect farmers and individual taxpayers. The material beginning on page 2 reflects only a few of the many changes included in the 1988 legislation. Dairy and beef farmers will be exempt from capitalization rules beginning in 1989. In return all farmers will be restricted to 150 percent declining balance on 200 percent DB property. Farmers will no longer pay the diesel-fuel tax for off highway use. Drought assistance payments received by farmers will not have to be reported until the year following the drought. MACRS depreciation periods on single purpose agricultural structures, orchards and vineyards will be charged for assets placed in service after 1988. Taxpayers using their homes as their offices will not be able to deduct the monthly base cost of the first telephone line into the residence. The TRA 1986 provision that required individuals to report certain mutual fund expenses as miscellaneous deductions is delayed until after 1989. Research and development tax credits, and the jobs tax credit were extended. A taxpayers' bill of rights provision intended to strengthen a taxpayer's position when fighting IRS was included. TAMRA 1988 is the second important piece of federal tax legislation in less than 12 months. The first was the Revenue Act of 1987, part of the Omnibus Budget Reconciliation Act, which became law on December 22, 1987. Important provisions affecting tax years of partnerships and S corporations and social security coverage are reviewed in this publication.