Question : I recently retired at age 64 and started taking social security payments. after retiring, I worked part time for a farmer. The farmer is wanting to pay me in kind by transferring title to some grain to me. If I agree to this form of payment, when is the income taxable to me, in the year I receive the grain, or the year I sell the grain? Also, what effect might this have on my social security?<br/>JA: What’s your current age and retirement age?<br/>Customer: Current age is 64. Retired at age 63. DOB is 8-8-1955<br/>JA: Anything else you want the Accountant to know before I connect you?<br/>Customer: Not that I can think of….
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Answer : Thank you for your patience. You are engaged in a bartering activity for a commodity. There are two tax events in regard to the commodity. The payment in kind, which is taxed as ordinary income at the current wholesale market value of the commodity in the year that you receive it.When you sell the commodity you will have a capital gain or loss in the year that you sell it. Because it will be a short term capital gain or loss you will be taxed at your ordinary-income level if there is a gain. Your cost basis for the grain will be its wholesale market value when you received it. You calculate the gain or loss by subtracting the selling price (minus expenses) from your tax basis.As for the original earnings on the grain, for the year 2019, there is an earned income limit of $17,640 ($1,470 per month). If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit. Please let me know if you have any additional questions on this.I may be offline for a while. If I do not respond right away I will respond as soon as I return.Otherwise, if you are satisfied with the information please do not forget to rate me – click the five stars. It adds nothing additional to your costs, but it helps me greatly. Plus it is good Karma for you. Thank you. Kind regards,Gerald
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