TN 21 (11-23)

RS 02505.110 Farm Arrangements

A. Introduction

“Farm arrangements” refer to the agreements or arrangements that govern the operation and management of a farm after entitlement to Social Security benefits. Farm arrangements affect the amount and kind of services performed by a self-employed beneficiary and thus the level of retirement.

B. Policy

1. Farm Operators

RS 02505.070-RS 02505.095 applies in determining whether a self-employed farm operator is rendering substantial services in any one month.

2. Farm Landlords

No Material Participation

  • Income received by a landowner in cash or as a share of crops produced on the land by a tenant is rental from real estate and is excluded from NESE.

  • Any services a landowner performs under a rental arrangement will be disregarded in determining whether the landowner rendered substantial services.

C. Procedure

1. Substantial Services

a. Farm Operator

  • Consider all services in determining whether substantial services were rendered.

  • Substantial services may be rendered during those months when work in connection with growing crops is not done. A farmer may be: repairing or constructing fences, equipment, buildings, and machinery; be engaged in fallow plowing, insecticide spraying, or weed control; be negotiating for sale of crops; or be buying new farm equipment, etc.

  • Where the business involves the use of the same premises as a place of business and residence, distinguish between the activities in connection with the residence from those in the trade or business. A farmer who has retired may continue to live on the farm. The time devoted by the farmer to the repair and maintenance of their residence, raising vegetables, livestock, and poultry primarily for family consumption will not be considered as time devoted to the business.

b. Farm Landlords

  • Avoid confusing material participation with substantial services.

  • Issues of material participation are settled by looking to the farm landlord's over-all participation throughout the entire crop season.

  • Issues of substantial services relate to services performed in each separate month of the year.

  • The fact that a landlord has materially participated does not necessarily mean that the landlord has rendered enough services in any particular month of the year to constitute substantial services.

2. Material Participation

In applying the rules in RS 02505.065-RS 02505.100 to farm landlords, be careful to consider the time spent in managing, inspecting, advising, and consulting, as well as in performing physical farm work.

D. Examples

A farmer sows a large acreage of winter wheat. From the time of sowing to harvest, no appreciable time in active management or labor may be required. This farmer may be receiving a substantial income from the farm; or be doing all of the management and labor necessary for the operation of the farm yet may not be rendering substantial services in the off-season months. A similar example could be given for the operator of an orchard, or for other types of agricultural SE.

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RS 02505.110 - Farm Arrangements - 11/14/2023
Batch run: 11/14/2023