This Note will first explain the source and operation of the benefits that may be derived from the utilization of the farm tax rules. Additionally, the ability of taxpayers to use farm losses to offset nonfarm income through sheltered investments will be examined. Next, the Note will review the attempt of Congress to reform the farm tax laws through the Tax Reform Act of 1969, including the attempted elimination of sheltered farm investments. Part III of the Note will explore the mechanics of those provisions of the Tax Reform Act of 19766 which were designed to curtail the use of the special farm tax rules by taxpayers other than ordinary farmers. Finally, the approach of Congress in attacking the farm shelter investment rather than requiring farmers to conform to accepted business accounting methods will be analyzed with respect to the relative equities and effects of the sizeable tax expenditure to the agricultural community.
Note, Farm Tax Advantages after the Tax Reform Act of 1976: Congress Finds the Needle but Misses the Haystack, 27 Clev. St. L. Rev. 85 (1978)