Watch Out For Legal Entities for Extra Payment Limit

If you have a legal entity, both the entity and the owners must have more than 75% of average gross income from farming

Photo by Aaron Burden on Unsplash

We had a reader reach out to us with the following question:

“Hi Paul, I am working on an ECAP application for a client whose farming operation is in a C corp. This is the only thing in the C Corp so it meets the qualifications for the upper limits. The stock is owned by a husband and wife, with one's shares in a grantor trust and the other a revocable trust. The FSA office is saying that the owners need to meet the tests at the individual level as well to qualify for the upper limit. This is not possible as they do not have any farm income at the individual level as it is all in the C corp. Any guidance on this or is the FSA office correct? I can’t seem to find a good example.”

The FSA office is correct that both the corporation in this case (or any legal entity such as an LLC) and the husband and wife both need to have more than 75% of their average gross income from farming.