For farm operators, gifting grain directly, rather than selling the grain and making a gift from the proceeds, may provide very significant tax savings. Five keys:

  1. Contributing grain allows Donor to avoid sale of the commodity as income, while the production costs may well still be deductible. Reducing taxable income may provide advantages such as minimizing or eliminating self-employment tax and reducing AGI.
  2. Be sure the gift is grain commodities, not a grain storage receipt, which could be considered a cash-equivalent-gift.
  3. The Charity must be able to demonstrate “control and dominion” over the gifted property. Therefore, Donor cannot offer Charity any guidance as to when to sell the commodity.
  4. There should be no prior sale commitment made before the gift of grain is made, as, again, Charity must be in control of the timing of the sale. After the grain ownership is transferred, the Charity assumes all costs and risk of a down market.
  5. Many grain farmers annually certify or document bushels of production with a Farm Service Agency for purposes of enrolling that grain production in various agriculture subsidy programs. Potential donors should be urged to accomplish FSA certification before making gifts of grain commodities.