Grower Shields Social Security by Selling Unharvested Crop With Land Under Section 1231
Updated
Updated · Yahoo Finance · Aug 18
Grower Shields Social Security by Selling Unharvested Crop With Land Under Section 1231
2 articles · Updated · Yahoo Finance · Aug 18
Summary
An early Social Security claimant can keep a final blueberry crop from counting under the retirement earnings test by selling the berries unharvested as part of the farm sale.
Section 1231 lets gain on a standing crop sold with qualifying farmland be treated as business-property sale proceeds rather than Schedule F farm income, keeping it out of net self-employment earnings.
To qualify, 1 buyer must acquire the land and crop in a single transaction, the land must have been held more than 1 year, and no berries can be picked before closing.
The gain still faces federal tax and may get long-term capital-gains treatment, while crop-growing costs are added to the property's basis instead of deducted as farm expenses.
The strategy matters only for people claiming before full retirement age, because Social Security withholds benefits when wages or self-employment income exceed the annual earnings limit.