CB Farmers Trust
A tax-efficient harvest program that lets farmers defer income taxes and reinvest earnings, season after season.
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Learn more about the benefits of using the FIST program
How This Works
What is a Farmer's Installment Sale Trust (FIST)?
A Farmers Installment Sale Trust (FIST) is a financial transaction using Internal Revenue Code 453A, that allows a farmer to defer the taxes on his agricultural asset sale for up to 30 years and immediately return up to 90% of his taxable proceeds. This allows for the farmer to finance future crops or investments.
Created to give farmers a tax break, this method defers the tax on the sale of farm land and/or farm production (see definition I.R.C. § 2032A(e)(5)). The program is IRS compliant following Internal Revenue Code 453A, and has been in use for decades by large farms and corporations on qualified sales.
Why Use a Farmer's Installment Sale Trust (FIST)?
You can defer the tax hit for 30 years.
Why is this a big deal?
Instead of paying a big chunk of money to the IRS, you keep that cash in your in your farm, where it pays for next season.
Also, $1 today is a lot more expensive than $1 in 30 years. How much was your dollar worth in 1990 compared to today?
Now, since the tax is paying for next season, you have two options:
- Further expand your farm with your additional money.
- Stay the same size and take a bigger profit.
What does the IRS Say About This?
Let's break this down. Farmer's Installment Sale Trust (FIST) is a special rule that can help you save money on taxes, but it's only for farming-related transactions.
According to I.R.C. § 2032A(e)(5), "farming" can mean a lot of things, like raising animals, growing fruits, or even harvesting timber. "Farming purposes" are the specific things you do on a farm, like growing crops or storing them before they get turned into something else.
Now, it's super important to play by the IRS rules. For example, let's say you've got a big container of soybeans. If you sell those using a Farmer's IST, you could delay paying taxes on that money for up to 30 years. But hold on—if you process those soybeans, they're considered "manufactured," and then you can't use the Farmer's IST program.
Additionally, if you've got equipment on your farm that's lost some of its value over time (like an irrigation system), you now owe taxes on depreciation. With a Farmer's Installment Sale Trust, you can defer the taxes paid to depreciation recapture. Basically, the IRS says, "We let you defer the payment of those taxes for up to 30 years."
What is NOT allowed for a Monetized Installment Sale?
With backlash about the Monetized Installment Sale, we need to address the elephant in the room.
The IRS issued regulations that identify certain Monetized Installment Sales as "listed transactions." These certain sales include, only non-agricultural-related;
- Property
- Appreciate Assets
- Business Transactions
Basically, the IRS wants everyone to pay the taxes they owed when abusing the Monetized Installment Sale for stuff other than farm-related goods. These are considered abusive tax transactions that must be reported to the IRS.
So, bottom line: IRS code 453(b) specifically states agriculture land and produce are the only assets allowed to be sold utilizing this type of installment sale. Make sure you know what counts and what doesn't, so you can best plan around taxes.
If you are looking to sell a highly appreciated asset like a business or property, check out the Installment Sale Trust. This financial vehicle is also IRS-accepted.
Frequently Asked Questions
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