CFAP Belongs to the Farm, Not the Owners

  • Agribusiness
  • 1/6/2021
CasualBusinessmanListeningtoCollegue

Any CFAP payment earned by a farm entity belongs to the farm entity not the "owners" of the farm entity.

Farm entities who receive CFAP payments in 2020 or 2021 may have increased limits due to certain owners providing at least 400 hours of labor to the entity.

I have heard from a few readers and CPAs that these owners seem to think they are then entitled to receive those extra payments.  The correct answer is that these payments were earned by the entity and should remain as part of the entity and not directly distributed to those owners.

The entity earned all of the payments.  If there are extra owners that allow a greater payment that is a benefit to the entity and not a benefit to the owner(s).

If the owners want to make a distribution of some or all of these payments it should be done on a pro-rata basis, but make sure you understand any possible income tax consequences.

 

 

This blog contains general information and does not constitute the rendering of legal, accounting, investment, tax, or other professional services. Consult with your advisors regarding the applicability of this content to your specific circumstances.

Experience the CLA Promise


Subscribe