For many years the IRS in Publication 225 (The Farmers Tax Guide) had indicated that farmers could not elect to defer crop insurance proceeds to the following year for revenue protection (RP) policies. We had mentioned this in a few other blog posts and in our farm tax update seminars.
It appears that the IRS has now gotten the message and updated this publication. The wording on this is found on page 12 in the middle of the left-hand column as follows:
“Proceeds received from revenue insurance policies may be the result of either yield loss due to physical damage or to decline in price from planting to harvest. For these policies, only the amount of the proceeds received as a result of yield loss can be deferred. Proceeds received from weather insurance policies cannot be deferred if the payment is based on rainfall amounts and is not a result of physical damage to a crop.”
This is good news since most farmers have elected to defer the yield portion of RP crop insurance policies for the last few years. Note that the language does indicate that the decline in price from planting to harvest cannot be deferred. Typically the crop insurance company will calculate this portion for the farmer.
A farmer still must meet the normal crop insurance election requirements to defer the yield portion.
