Gift of Grain Program
DONATE GRAIN • SAVE MONEY • MAKE A DIFFERENCE
Why donate grain directly?
For many cash basis farmers, large tax savings can be achieved by donating crops directly to the Oklahoma 4-H Foundation.
Cash charitable contributions are deductible only as an itemized deduction from adjusted gross income which results in reducing federal income tax only. Many farmers do not itemize deductions because the standard deduction has greatly increased over the years. By contributing crops to the OK 4-H Foundation, the cash basis farmer avoids having to include the sale of the cash crop in income, which results in saving self-employment tax, federal income tax and state income tax.
Use professional advisors
The farmer should always consult with his or her professional tax or legal advisors to determine tax implications prior to making the gift. Because of rapid changes in tax law, information provided here may be obsolete.
Crop share landlords are NOT eligible.
Shares of crop are rental income that must be reported as income by landlord
Farmer must make a charitable “donation,” giving up “dominion and control” of the asset. The typical procedure of a farmer delivering, selling and ordering the proceeds sent to the charity does not work. This is considered assignment of income because the farmer has not given up control of the property. The proceeds must be reported as a cash sale with a subsequent cash donation; this results in payment of self employment tax and the income tax savings may be less or possibly nothing. This is why it is important to follow procedure. The property should be delivered and a receipt showing the OK 4-H Foundation as owner should be executed. The Foundation then orders the sale of the crops. The original sales invoice should show the Foundation as seller. The farmer should avoid advising the charity as to when to sell the crops, as that may be construed by the IRS as “retaining control.”
Passage of risk to the charity
After the transfer, the OK 4-H Foundation assumes the cost of storage, transportation and marketing, and bears any risk of loss.
The OK 4-H Foundation will retain in its files: Warehouse receipt or storage ticket the Foundation’s name. The original sales invoice showing the Foundation as the seller. If the crops are to be stored on the farm, a notarized letter of transfer can take the place of a warehouse receipt.