Computerized Farm Record Keeping with Quicken® 2003

Bulletin 908

CCC Loans

CCCLoanAsInc

This is an income category used to report the CCC loan as income. This is a tax-related category and is reported on line 7a, CCC loans under election, on Schedule F and is reported in the year the loan is received.

[CCCLoan]

This is a liability account and was discussed previously. This liability account is used regardless if CCC loans are treated as loans or as income.

[CCCBasis]

This is an asset account. The amount of CCC loan(s) treated as INCOME is reported as taxable income in the year the loan(s) is received and creates a basis in the grain equal to the loan amount. This basis (equal to the loan amount) is added to this account. If the grain is forfeited to repay the loan, no additional taxable income is due since the income from forfeiture is exactly offset by the basis. However, the appropriate entries should be made to reflect payment of the loan. If the loan is paid off with cash, this basis can be reported as a tax deductible expense when the grain is sold or fed. If the grain is sold, the basis is reported as CCCGrCost discussed next. If the grain is fed, the grain=s basis is reported in the Feed Purchased category.

CCCGrCost

This is an expense category to record the basis (cost) of the redeemed (or forfeited) CCC grain sold, when you treat CCC loans as income. It is a tax-related category and is reported on line 2 of Schedule F.

Loan numbers, quantities and amounts need to be recorded to help keep track of each loan. If part of a loan is redeemed, part of the cost can be deducted at the time the grain is sold. If redeemed grain is still on hand at the close of the business year, the [CCCBasis] account will show the cost basis, for balance sheet purposes, of redeemed grain to be used for resale or for feed.

Example

On 10/27/20X2 $53,500 is received for soybeans placed under CCC loan. You report CCC loans as income on your tax return for 20X2. On 5/16/X3 the loan is paid off along with $1,951 of interest. The entries would be made in the FARM CHECKING register as follows.

Date	Num	Payee	Memo	Category	Amount	Balance
		Previous Balance				15,000.00
10/27/X2	DEP	County FSA	10,000 bu.	--SPLIT--	53,500.00	68,500.00
		**Split Screen Detail**
		Category		Amount
		1. CCCLoan As Inc		53,500.00
		2. [CCCLoan]		53,500.00
		3. [CCCBasis]		-53,500.00
5/16/X3	101	County FSA	10,000 bu.	--SPLIT--	55,451.00	13,049.00
		**Split Screen Detail**
		Category		Amount
		1. [CCCLoan]		53,500.00
		2. Interest Exp		1,951.00
5/22/X3	DEP	Farmer's Grain		--SPLIT--	54,000.00	67,049.00
		**Split Screen Detail**
		Category	Memo	Amount
		1. Grain Sold	Sell redeemed CCC grain	54,000.00
		2. CCCGrCost		-53,500.00
		3. [CCCBasis]		53,500.00

The CCC Loan of $53,500 increases the checking account balance, adds $53,500 to the CCCLoan account, and adds $53,500 to the CCCBasis asset account. When the grain is redeemed in May 20X3, the $55,451 comes from the checking account to pay off the loan and the accrued interest. When the soybeans are sold, the basis is used to reduce taxable income. To create the deductible expense, reduce the CCCBasis account by $53,500 and increase the CCCGrCost expense category by $53,500. This has no effect on the checking account balance, but makes the taxable portion of the grain sale $500 ($54,000 - $53,500). The $53,500 was reported as taxable income in 20X2, the year before. If the soybeans had sold for less than $5.35 (the loan rate) per bushel, the taxable portion of the sale would be negative rather than positive as shown in this example.

As discussed earlier, in situations where the posted county price (PCP) is less than the loan rate, the loan can be paid off for a lesser amount (based on the PCP) than the original loan amount and a marketing loan gain results. When CCC loans are treated as income and the loan is later repaid for a lesser amount based on the PCP, the resulting marketing loan gain reduces the basis in the redeemed grain by the amount of the gain.

Using the same facts from the above example, but when the loan is paid off on 5/16/X3, the soybeans can be redeemed and the loan paid off for $49,000 based on the PCP (the original loan amount was $53,500) and the interest accrued is forgiven. The payoff of the loan and the reduction in the basis of the redeemed grain is shown in the FARM CHECKING account register:

Date	Num	Payee	Memo	Category	Amount	Balance
		Previous Balance				$58,700.00
5/16/X3	102	County FSA	10,000 bu.	--SPLIT--	49,000.00	9,700.00
		**Split Screen Detail**
		Category	Memo	Amount
		1. [CCCLoan]	Loan payoff	53,500.00
		2. [CCCBasis]	Marketing loan gain	-4,500.00

This register entry pays off the CCC loan for $49,000 (original loan amount was $53,500) and reduces the basis in the redeemed grain by the difference between the original loan and the amount to pay it off, $4,500. The basis in the redeemed grain is now $49,000. The $4,500 marketing loan gain will be taxed on Schedule F when the grain is sold with a reduced basis of $49,000. Or if the grain is fed, it will show up as a reduced feed expense due to the reduced basis of $49,000.

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