Gifts of Ag Commodities
Farmers and agricultural producers who donate to charity can take advantage of giving their agricultural commodities instead of cash. Transferring their products directly to charity provides more significant tax savings than selling grain or livestock and gifting from the cash proceeds. If you are planning to donate to your church or the charities you support, consider gifting grain or other agricultural commodities.
Why does it work?
By contributing agricultural commodities, farmers can avoid recognizing the sale of the product as income, while the production costs may still be deductible as expenses. Reducing taxable income in this way may provide advantages such as minimizing self-employment tax and reducing adjusted gross income. These tax advantages generally apply to donors who are active producers and their materially participating agricultural landlords.
Documentation is important.
When donating agricultural commodities to charitable organizations, it is important to properly document the transfer of ownership of the product itself. To benefit from these tax advantages, donors must be able to show that they relinquished “dominion and control” over the product. For example, if donors merely deliver grain to an elevator and direct that payment be made to a designated charity, this may be considered a “cash” donation by the IRS, since ownership of the grain itself was never clearly transferred to charity. Instead, when delivering grain to an elevator, donors must get a receipt from the elevator showing the charity as the new owner. The charity then communicates directly with the elevator to sell the grain and receive the cash proceeds.
How do I donate agricultural commodities to Anabaptist Foundation?
Contact Anabaptist Foundation at 800-653-9817 or email [email protected] to request a Gift of Agricultural Commodities Notification Form.
Fill out and return the form to Anabaptist Foundation, detailing the product, approximate quantity, place of delivery, and prospective buyer’s contact information. Keep a copy for your own use.
Deliver the product to the buyer as usual but inform them that you are transferring ownership to Anabaptist Foundation, providing them with a copy of the Gift of Agricultural Commodities Notification Form.
Request a receipt from the buyer showing Anabaptist Foundation as the owner and instruct them to wait for specific instructions from Anabaptist Foundation before selling the product or issuing payment.
Notify Anabaptist Foundation when delivery is planned or has been made and provide a copy of the delivery receipt if available.
Anabaptist Foundation will then contact the prospective buyer to negotiate the sale of the product.
When payment is received, Anabaptist Foundation will issue you a Letter of Acknowledgment which shows the date, product, and quantity of your donation, without listing the value of the donated product. This will be your donation receipt that your tax preparer may request when filing your taxes.
Anabaptist Foundation will deposit the cash proceeds from selling your donation into a Charitable Gift Fund account in your name. You may recommend distributions from this account to your church and the charities you support in accordance with our Charitable Gift Fund guidelines.
Points to remember:
Make sure you receive a receipt from the buyer listing Anabaptist Foundation as the owner, to show transfer of ownership from the donor to AF. For example, a grain storage receipt in your name only is insufficient because it could be considered a cash equivalent.
As the donor, you may not offer instruction to the buyer or charity regarding the sale of the gifted commodity. Anabaptist Foundation must initiate this transaction independently from the donor.
Your gift is an irrevocable contribution to Anabaptist Foundation and is nonrefundable. A one and one-half percent (1.5%) administrative fee is assessed when the sale proceeds are available in your Charitable Gift Fund account for distribution to charity.
If you have not previously established a Charitable Gift Fund account, please contact Anabaptist Foundation for a Charitable Gift Fund application before you submit a Gift of Agricultural Commodities Notification Form.
Certain other agricultural products such as livestock, eggs, or equipment may also be donated if they can be readily sold at market prices.
Anabaptist Foundation does not offer tax or legal advice. Please consult your tax advisor regarding your specific tax situation prior to donating agricultural commodities.
This information has been prepared for educational purposes only. It is not legal advice, nor a legal opinion on any specific matters. Please consult your tax advisor.