EES POLICY NO. 99-10-05
(Originally 86-08-04)

RE: Farm Loss Provisions


KEESM: 7122.2


FROM: Dennis Priest


DATE: October 1, 1999
            (Originally 8-18-86)


Program(s): Food Assistance

Several questions have arisen regarding whether or not a person who owns farmland but does not actually farm it is entitled to the farm loss offset provision described in KEESM 7122.2. This question was cleared through the Regional USDA Office, who provided the following response. Depending on the specifics of each case situation, the farm loss offset provision may be applicable.

The following illustrates the two most common situations that may arise. Variations on these are quite possible and may require review by the EES Policy Section in conjunction with USDA, if necessary, to determine the allowability of the farm loss provision.

The first situation involves a food assistance household that lives "in town", who owns farmland that is leased on a cash rent basis. They do not share in the profit or loss of the farm, they just collect rent on a yearly basis. In this type of situation, the household is not entitled to the farm loss offset provision. The rent received for the land would be treated as unearned income (possibly earned if actively engaged in management of the property an average of twenty hours a week KEESM 6313(1) and, for the land to be an exempt resource, it must be producing income (rental) consistent with its fair market value, KEESM 5332.

In the second situation, a food assistance household lives "in town" and owns farmland that is being farmed by someone else. The food assistance household does not collect any rent for the land, instead they share in the expenses and profit (or loss) from the farming enterprise. If there is a loss, this household is entitled to the farm loss provision. If there is profit, the income received by the "in town" household is considered earned self-employment income. The land is exempt as farmland essential to employment per KEESM 5334.



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