In the article you will learn:

· How the OBBBA “supercharges” the value of an I.R.C. §754 election;

· How the new I.R.C. §168(n) rules introduce a major trap for production buildings; and

· Why entity classification at death is now a decisive tax event and how pre-mortem planning is needed to ensure a full basis step-up.

A comprehensive example is included.

This issue is also full of recent court and IRS administrative developments. Here’s a summary of what’s included:

· The Tax Court reaffirmed that a taxpayer cannot create basis by contributing their own promissory note to a partnership - even through a disregarded entity.

· As S corporation shareholder with zero basis may deduct losses only to the extent of income allocated during the year - even if the income and losses arise from different activities.

· The IRS violated I.R.C. §7517 by failing to provide a written valuation explanation, but the Tax Court held there is no penalty for noncompliance.

· The Indiana Supreme Court held that landowners owe a duty not to create hazards in the right‑of‑way, not just on the roadway surface.

· A broker’s $200,000 commission claim survives summary judgment due to factual disputes over whether the broker’s efforts were the proximate cause of a 2,300‑acre sale.

· The IRS successfully used the bank deposits method after finding unreliable accrual‑basis records.

· A $70 million conservation easement deduction was upheld because the IRS issued its Final Partnership Adjustment after the statutory deadline.

• A federal court vacated the IRS’s microcaptive “listed transaction” designation for violating the APA and, in another case, the Tax Court found a microcaptive lacked economic substance and imposed a 40% penalty for nondisclosure.

• Multiple cases reaffirm that emotional distress alone does not qualify for §104(a)(2) exclusion.

• A suspended corporation lacked capacity to file a Tax Court petition; later reinstatement could not cure the defect.

• Proposed rules for the Trump Account Pilot Program outline eligibility, filing requirements, and contribution mechanics for the new $1,000 Treasury-funded child accounts.

• In the battle between fence lines and original surveys, two cases illustrate opposite outcomes.

• A new USDA–DOI MOU prioritizes livestock grazing on federal lands, emphasizing “no net loss of AUMs” and streamlined permitting.

• Despite the end of Chevron deference, the Sixth Circuit upheld the DOL’s authority to bar third‑party home care agencies from using FLSA exemptions due to explicit statutory delegation.

• Nevada’s high court held that cannabis licenses, though privileges, can be pledged as security subject to regulatory approval.

West Virginia Seminar June 4-5

This issue also includes information about the upcoming two-day seminar that Paul Neiffer and I will be conducting at the lodge and conference center at the beautiful Chief Logan State Park near Logan, WV. If you’re not a subscriber, information about the seminar and how to register is available here: Farm and Ranch Tax/Estate Planning Seminar (June) | Washburn Law

If you’re not yet a subscriber, I encourage you to become one. It will be worth it to your practice.

Thanks.

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When your farm and ranch clients receive an “adverse decision” from a USDA agency—whether it’s a loan denial from the FSA, an EQIP dispute with the NRCS, or a complex crop insurance challenge—the impact on their operation can be immediate and severe. As a tax professional, you are often the first person they turn to when these financial setbacks hit.

Do your clients have a clear path for recourse? Are they aware that missing a 30-day window can permanently extinguish their right to contest a decision?

In my latest article, “Navigating USDA Disputes: A Guide to the National Appeals Division,” I break down the structured administrative path farmers must follow to challenge USDA actions. Understanding this process is vital for any practitioner advising agricultural clients, as it moves beyond tax returns and into the specialized world of administrative law where the “Agency Record” is everything.

Why this matters for your practice:

• Protecting Client Rights: Learn the critical deadlines and the “General Applicability” limitations that determine whether a case can even be heard by the NAD.

• The Burden of Proof: Discover why a “chaotic collection of grievances” rarely wins and how to help your clients organize evidence to meet the preponderance of the evidence standard.

• Shifting Judicial Landscapes: I examine how recent Supreme Court precedents like Loper Bright have fundamentally changed how courts review agency interpretations of law—meaning the USDA can no longer rely on broad deference when their handbooks stretch the text of a statute.

• Procedural Precision: Gain insight into the distinction between routine factual disputes and the narrow, extraordinary constitutional challenges that might bypass the administrative process.

For the agricultural practitioner, the rules of the National Appeals Division are not mere formalities; they are the essential framework for securing the relief your clients claim entitlement to. Whether you are helping a client prepare for a prehearing conference or identifying a discrepancy between a

USDA handbook and the underlying statute, this guide provides the roadmap you need to advocate effectively.

Subscribers may read the full analysis below.

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Whether you are an attorney, CPA, or agribusiness professional, staying ahead of these changes isn’t just about compliance; it’s about protecting your clients’ legacies and “nest eggs.”

Join myself and Paul Neiffer this June for an intensive, two-day deep dive into the most critical tax, estate, and business planning issues facing rural landowners today.

Seminar Highlights: Cutting Through the Complexity

This isn’t just a dry recitation of the tax code. We are diving into high-stakes, tactical planning:

• The “Infinite Banking” Mirage: Learn to identify technical risks for farm S-Corps before they trigger a “Modified Endowment Contract” disaster.

• Succession Math: Discover how I.R.C. §743(b) and the restoration of 100% bonus depreciation can become a powerful financing tool for the next generation.

• The Retirement “Nest Egg”: Examine the biggest threats to retiring farmers, from depreciation recapture to the strategic use of CRTs.

• LLC vs. Public Benefit Corp: Is your client’s structure a valid tax shield or an IRS target? We’ll look at the latest 2026 rulings.

• FSA & OBBBA: Master the new attribution rules and the $155,000 baseline payment limits.

Event Details

• Dates: Thursday, June 4 – Friday, June 5, 2026

• Location: Chief Logan Lodge & Conference Center (Logan, WV) OR Online via Zoom.

• CPE/CLE: McEowen P.L.C. is an NASBA certified provider. This program qualifies for Group Internet Based (GIB) credits is pending credit approval for Group Live (GL).

Ready to master the new rules of 2026? Don’t let “tax complacency” put your farm and ranch clients at risk. Space is limited for the in-person session in West Virginia—secure your spot today.

[For more information and to Register click here: Farm and Ranch Tax/Estate Planning Seminar (June) | Washburn Law

Paul and I have prepared a video for you where we discuss the conference. You may watch the video here:

The final regulations expand the list of eligible occupations, clarify the definition of a “qualified tip,” and detail the mechanics of the deduction, including limits and phase-outs. Key takeaways include:

· Expanded Eligibility: The list of qualifying occupations has grown, now including roles like floral designers, visual artists, and gas pump attendants (I can’t remember the last time I saw one of those – can I tip myself and deduct it???).

· Defining a “Qualified Tip”: The regulations provide a clear definition, notably excluding mandatory service charges and tips paid in digital assets like Bitcoin. However, voluntary amounts paid above a mandatory charge and adjustable suggested tips are considered qualified.

· Deduction Limits: The deduction is capped at $25,000 per year and is subject to a phase-out for taxpayers with modified adjusted gross income (MAGI) over $150,000 ($300,000 for joint filers).

A significant focus of the new guidance, and in the article, is the favorable impact on farm operations. The regulations confirm that individuals operating farm stands, farmers market booths, and similar non-restaurant venues qualify for the deduction under the “food and beverage servers, non-restaurant” category.

Subscribers may read the full article for a comprehensive breakdown of the regulations, including detailed examples for self-employed individuals and farm couples, to understand how to navigate these changes and maximize potential tax benefits.

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While the benefits of real-time account access and direct communication with the IRS are clear, navigating the new system requires understanding a strict, multi-layered security framework. The roles of the “Designated Official” and “Designated User,” along with the mandatory identity-proofing and revalidation processes, are critical for any entity or tax professional to master.

My latest article breaks down everything you need to know about this game-changing update. I cover the new features, who is eligible, and provide a detailed guide to the crucial authentication and authorization process to ensure you can leverage this powerful tool securely and effectively.

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In my latest post, I break down the core of this $99 million agreement, the specific eligibility for the settlement fund, and why John Deere’s legal hurdles are far from over despite this deal. From the pending FTC enforcement action to a wave of new state laws, we are witnessing a fundamental shift in equipment autonomy.

Read the full analysis to see what this means for your operation and the future of the industry.

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However, from a legal and tax perspective, IP is often misunderstood. This confusion can lead to missed deductions or, worse, unintended tax hits upon a sale. In my latest post, I break down the shifting landscape of agricultural IP, including:

• The OBBBA Rebound: How the One Big Beautiful Bill Act has restored the ability to fully expense domestic R&E costs, providing a massive cash-flow win for innovators.

• Documentation is King: Lessons from the 2026 Tax Court case George v. Commissioner on why “routine data-driven farming” isn’t enough to secure the R&D tax credit.

• The Section 1235 “Narrow Gate”: Why individual creators can snag automatic long-term capital gains, but corporate entities and family-held businesses often hit a “related party” wall.

• Who Owns the Data? Navigating the contentious world of “digital equity,” yield maps, and soil health records as amortizable assets.

The “right to save seed” and “right to repair” are just the tip of the iceberg. As we move deeper into 2026, understanding the intersection of the Patent Act and the Tax Code is no longer just a “Big Ag” issue—it’s a farm gate issue.

Read the full analysis below.

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Feature Analysis: The Amortizability of Farm Program Base Acres

The central question of whether the cost allocated to farm program base acres can be amortized is definitively addressed. The analysis concludes that under current law, these rights are not amortizable.

• Classification as an Interest in Land: The Internal Revenue Code, specifically §197(e)(2), and accompanying Treasury Regulations (§1.197-2(c)(3)) explicitly exclude “any interest in land” from the definition of an amortizable intangible. The regulations further clarify that crop acreage base is considered an interest in land.

• Capitalization Required: Consequently, costs allocated to acquiring base acres must be capitalized. This tax basis is only recoverable upon the sale or other taxable disposition of the land or the rights themselves.

• Judicial and IRS Stance: The IRS has consistently maintained this position, which has been supported by judicial precedent. The recent Tax Court case, Conmac v. Comm’r, while focused on the procedural failure to obtain IRS consent for a change in accounting method, underscores the significant risks taxpayers face when attempting to deduct amortization for base acres. The court did not alter the underlying substantive rule that base acres are non-amortizable.

• Depreciation under §167: While a theoretical path for depreciation under §167 exists for intangibles with a determinable useful life, the burden of proof is exceptionally high for base acres. Given that federal farm programs are subject to periodic renewal and legislative changes, establishing a reasonably ascertainable useful life is nearly impossible.

• Distinction from Other Rights: The article contrasts non-amortizable base acres with other amortizable rights connected to agricultural land, such as an American Viticultural Area (AVA) designation, which is considered a governmental license rather than an interest in land.

Key Tax and Legal Developments

Federal Income Tax:

• Business Interest Limitation “Reset”: In a game-changing development, new IRS guidance allows farming businesses to withdraw prior elections made under I.R.C. §163(j). Businesses that elected out of the interest deduction limitation at the cost of forgoing bonus depreciation can now reverse this decision retroactively for tax years as far back as 2022, potentially unlocking significant immediate deductions.

• Crackdown on Conservation Easements: The Tax Court continues its scrutiny of syndicated conservation easement transactions. In cases like Harman Road Property, LLC v. Comm’r, deductions were drastically reduced from tens of millions to thousands of dollars. The court rejected speculative “highest and best use” appraisals (e.g., a quarry on agricultural land) and imposed the stringent 40% gross valuation misstatement penalty, for which the “reasonable cause” defense is unavailable.

• Digital Asset Reporting: The IRS has issued proposed regulations to streamline tax reporting for digital assets, offering brokers an optional, fully electronic method for obtaining customer consent to receive Form 1099-DA. Additionally, transitional relief allowing taxpayers to use their own records for specific lot identification of digital assets has been extended through 2026.

• S-Corporation “Farmer” Status: A common point of frustration is clarified: shareholders of an S-corporation engaged in farming may not qualify as “farmers” for estimated tax penalty exceptions. The IRS distinguishes between the pass-through character of income and the shareholder’s personal involvement in the activity, often viewing the shareholder as an employee or investor rather than an operator.

Business and Estate Planning:

• Basis Consistency Rules: Final regulations under I.R.C. §§1014(f) and 6035 have been issued to prevent “valuation whipsaws,” where an asset is undervalued for estate tax purposes but given a higher basis by heirs for capital gains purposes. The rules mandate consistency between the value reported on the estate tax return and the basis claimed by the beneficiary.

• LLC Fiduciary Duties: A Kansas case, Hornbaker v. Brown, serves as a stark reminder that members in a member-managed LLC owe each other the “utmost good faith.” The Business Judgment Rule does not protect members engaged in self-dealing; once a conflict of interest is shown, the burden shifts to the defendants to prove the “entire fairness” of the transaction.

• Power of Attorney Limitations: In Pfannenstiel v. Pfannenstiel, a Kansas court affirmed that general, boilerplate language in a Durable Power of Attorney is insufficient to grant an agent the power to amend or revoke a trust. Such authority must be expressly and specifically granted.

Real Estate and Regulatory Updates:

• Government Takings and Flood Control: The Federal Circuit’s decision in Ablan v. United States, concerning the intentional flooding of upstream properties during Hurricane Harvey, solidifies that such government actions constitute a physical taking requiring just compensation. However, the case also reinforces a strict “Objective Diligence” standard for the statute of limitations, meaning the clock to sue starts when the risk is discoverable, not when the damage occurs.

• Dormant Commerce Clause Challenges: State laws regulating agricultural production methods continue to face legal challenges. The digest reviews cases involving Massachusetts’s ban on pork from gestation crates (Triumph Foods) and Florida’s ban on lab-grown “cultivated chicken” (Upside Foods), highlighting the ongoing tension between state police powers and interstate commerce.

This summary captures the primary themes and critical updates from the latest Rural Practice Digest. The full issue provides deeper analysis, case citations, and practical insights, including information on upcoming seminars designed to help practitioners navigate this evolving landscape.

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The S corporation is a powerful tool for farmers and ranchers, offering liability protection and significant self-employment tax savings. But these benefits hinge on one critical, and often misunderstood, area: shareholder basis.

Without sufficient basis, you can’t deduct business losses or take tax-free distributions. A common pitfall is the “direct loan trap” - personally guaranteeing a bank loan to your S corp, mistakenly believing it gives you the basis needed to deduct losses. It doesn’t. This simple error can lead to disallowed deductions and unexpected tax bills.

My latest article, “Navigating S Corporation Basis for Farmers and Ranchers,” provides a practical, step-by-step guide to avoid this and other common traps. You will learn:

· The IRS-approved “back-to-back” loan structure to properly create debt basis.

· The specific documentation required to withstand IRS scrutiny.

· How to handle unique agricultural issues, like the basis of raised vs. purchased livestock.

Don’t let a technicality undermine your tax planning. Read the full article to protect your farm’s bottom line and ensure you’re maximizing the benefits of your S corporation.

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what captive insurance really is, and dives deep into what the new IRS rules mean for farm taxpayers. Whether you’re already using a captive or just want to understand the compliance landscape, this in-depth commentary will help you navigate the risks, reporting requirements, and opportunities in 2026 and beyond. Don’t miss this essential read for anyone in agriculture or tax planning—subscribe now to get the full analysis!

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The article below explores a powerful but nuanced exception: the special rule for retired or disabled farmers under I.R.C. §469(h)(3). We analyze whether a trust can utilize this rule by relying on the prior material participation of a trustee who has since become disabled. Discover the stringent “regular, continuous, and substantial” standard the trustee’s past activities must meet, the critical distinction between hands-on management and passive oversight, and the specific types of evidence the IRS will demand to approve the claim. This is a must-read for advisors navigating the complex intersection of trust law and the passive activity rules.

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Perhaps the most talked-about change is the proposed regulation under I.R.C. §163(h)(4). For tax years beginning after December 31, 2024, individuals can now deduct up to $10,000 annually in interest paid on loans secured by a “qualified passenger vehicle.”

What makes this unique?

• Accessibility: You can claim this even if you take the standard deduction (no itemizing required).

• The “50% Rule”: To qualify, you must reasonably expect to use the vehicle for personal purposes more than 50% of the time at the moment you take out the loan.

• No Annual Re-evaluation: Unlike most IRS rules, this is a “one and done” test. If you reasonably expect >50% personal use at the start, you don’t have to re-calculate based on actual mileage logs every year.

The Catch: If a vehicle is used primarily for business (over 50%), it doesn’t qualify for this specific deduction. Instead, it remains subject to standard business interest rules under Section 163(j). You cannot “double-dip” by claiming the same interest as both a business expense and a qualified vehicle deduction.

With these new benefits comes a higher bar for record-keeping. For the vehicle interest deduction, the IRS isn’t just looking at the VIN; they are looking at the taxpayer’s intent. In the video, I discuss best practices in terms of documenting that intent.

I also talk about new I.R.C. §1062 on farmland sales and the new OBBBA modifications to casualty losses.

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For many farmers and ranchers, the difference between a profitable year and just breaking even comes down to one thing: Self-Employment (SE) tax. In the latest issue of the Rural Practice Digest, I break down a critical (and often misunderstood) tax strategy for raised heifers. While most business assets only require a one-year holding period, breeding cattle are subject to a 24-month requirement to qualify for capital gains treatment.

Why this matters for your bottom line:

• The 15.3% Advantage: Qualifying your sales under I.R.C. §1231 doesn’t just lower your income tax rate; it shields those profits from the 15.3% Self-Employment tax.

• The “Zero Basis” Win: Since most producers deduct the cost of raising heifers on Schedule F, the entire sale price can often be treated as a tax-advantaged gain—if you time it right.

• The Audit Trap: The IRS is increasingly looking for “individual identification” rather than “group management.” If your record-keeping starts at weaning instead of birth, you might be handed a massive tax bill.

Also in this issue:

• Antitrust Blockades: A deep dive into the $500-per-car rail fee “paper barrier” currently facing grain producers in Kansas.

• Bankruptcy Reality Check: Why stealing cattle and hay can disqualify a producer from Chapter 12 protections.

• The IRS & AI: How the Service is now using artificial intelligence to “see through” complex partnership structures and basis-shifting strategies.

• Clean Water Act Updates: Why spray irrigation is no longer a “safe harbor” from federal permits.

Read the full analysis and get the technical “Practice Pointers” to protect your operation.

Ready to dive into the details? Subscribe to the Rural Practice Digest to access the full document and stay ahead of the legal and tax shifts impacting rural America.

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Subscribers read on:

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But in the recent 2026 Tax Court case of Kolar v. Commissioner, the script got flipped.

Despite a “perfect storm” of setbacks—including Hurricane Harvey and a historic deep freeze—Kenward Kolar managed to beat the IRS at its own game. This case is a masterclass in how professional recordkeeping and genuine expertise can outweigh “troublingly large” losses in the eyes of the Law.

In this report, I break down:

• The “Legacy” Defense: Why wanting your son to take over the family ranch isn’t a “hobby.”

• The “Living Business Plan”: How meticulous spreadsheets saved a taxpayer who didn’t even have a formal written plan.

• The Aggregation Trap: Why you can’t always rely on rising land values to bail out an unprofitable operation.

Whether you’re a tax professional or an operator facing the “Hobby Loss” gauntlet, the Kolar case provides a vital blueprint for defending your livelihood.

I trust that you’ll find my commentary useful.

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In today’s deep dive:

• The SNAP Showdown: How the “Make America Healthy Again” agenda plans to restrict “junk food” and tighten work requirements.

• Interstate Warfare: The GOP’s move to strike down state-level production mandates (and why the pork industry is cheering).

• National Security: New teeth for foreign land ownership reporting and a permanent seat for the USDA at the CFIUS table.

• The $1 Billion Bridge: Is the new specialty crop aid a lifeline or just a “drop in the bucket”?

The marathon sessions begin Feb. 23.

Quick Poll: What’s your biggest “Farm Bill 2.0” concern?

• The SNAP Overhaul: Are “junk food” bans and work requirements the right move?

• Prop 12 & States’ Rights: Should the federal government override state production laws?

• Specialty Crop Support: Is the $1B “Bridge” enough to save struggling growers?

• Foreign Land Ownership: Is the national security focus overdue or overblown?

Read the Full Analysis Here: https://www.lexblog.com/2026/02/14/the-2026-farm-bill-returns-house-republicans-unveil-farm-bill-2-0/

For farmers and ranchers, this isn’t just a win for “less red tape”—it’s a fundamental shift in the cost of doing business. From the “limp mode” errors in high-tech tractors to the looming threat of a “cow tax” on methane, the legal infrastructure that enabled these mandates is being dismantled.

In this technical update, I break down:

• The “Legal Trilogy”: How the Supreme Court’s rulings in West Virginia v. EPA and Loper Bright provided the “Major Questions” toolkit to end Chevron deference and strip the EPA of its GHG-regulating power.

• Machinery & Reliability: Why the repeal of Tier 4-linked GHG standards could lead to more durable, less complex, and significantly cheaper equipment designs.

• Energy & Inputs: The direct correlation between deregulating power plants and the prices you pay for nitrogen-based fertilizer and transportation fuel.

• The “Cow Tax” Shield: How removing the “endangerment” label protects livestock operations from future fugitive emission mandates.

The era of “regulatory creep” under the Clean Air Act is facing its steepest challenge yet. Is this a permanent victory for agriculture, or just a temporary reprieve before the next round of litigation?

Subscribers may read the full technical analysis below.

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