My example from yesterday’s post on step-up of cost of growing crop assumed the surviving spouse kept farming, so the crop came off and went on her Schedule F with self-employment tax attached. Several of you asked the obvious follow-up: what if the heirs are not farming?
The answer, as always, is it depends. Here is what it depends on.
The crop is still standing and the heir finishes it
This is the common case. The heir does not farm, but somebody has to take the crop to harvest. She hires it done, pays for the remaining chemical, the harvest, the hauling and the drying, and sells the grain in the fall.
She is not liquidating an inherited asset. She is finishing a crop. That income is farm income, and for a non-material-participating heir it most likely lands on Form 4835 rather than Schedule F.
The good news is that Form 4835 carries no self-employment tax. Same for the estate if the estate is the one taking it to harvest.
