For many cash basis farmers, significant tax savings can be achieved by donating crops directly to the Iowa 4-H Foundation.
Tax Savings
Cash charitable contributions are deductible only as an itemized deduction from adjusted gross income which results in reducing federal income tax only. By contributing crops to the Iowa 4-H Foundation you can avoid 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
Always consult with your professional tax or legal advisors to determine tax implications prior to making the gift.
Tips for Making a Gift of Grain
1. Timing. Gifts of grain to charities, such as the Iowa 4-H Foundation, can be donated from the current or previous year’s harvest.
2. Unsold commodity. The gift should be from unsold crop inventory with no prior sale commitment. A farmer will gift the grain to the Iowa 4-H Foundation and let them decide what to do with it and when to sell it.
3. Physical delivery. Be sure the gift is farm commodities, not warehouse receipts, which could be considered a cash equivalent. The charity must be able to demonstrate “control and dominion” over the gifted property.
4. Retention of control. Farmers cannot offer any guidance in the transfer agreement as to the retention or sale of the gifted commodity.
5. Documentation. Either a properly executed warehouse receipt in the Iowa 4-H Foundation’s name, or a notarized letter of transfer for crops stored on the farm. The original sales invoice should list the Iowa 4-H Foundation as seller.
6. Storage & transportation costs. After the transfer, the charity assumes costs of storage, marketing and transportation.
