Normally, you do not report loans you receive as income, and you report income from a crop for the year you sell it. However, if you pledge part or all of your production to secure a CCC loan, you can choose to treat the loan as if it were a sale of the crop and report the loan proceeds as income for the year you receive them. You do not need approval from the IRS to adopt this method of reporting CCC loans, even though you may have reported those received in earlier years as taxable income for the year you sold the crop.
Once you report a CCC loan as income for the year received, you must report all CCC loans in that year and later years in the same way, unless you get approval from the IRS to change to a different method. Refer to Change in Accounting Method in Publication 225.
Note: You can request income tax withholding on CCC loan payments made to you. Use Form W-4V, Voluntary Withholding Request (PDF). Refer to How to Get Tax Help in Publication 225 for information about ordering the form.
How To Choose To Report A CCC Loan As Income
To make the choice to report a loan as income, include the loan as income on line 7a of Schedule F (PDF) for the year you receive it. Attach a statement to your return showing the details of the loan.
Repayment of CCC Loans using CCC Certificates
Farmers who pledge part or all of their production to secure a CCC loan may not be properly reporting market gain when they use CCC certificates in connection with paying off their loans. See IR-2004-38, March 18, 2004, for more information regarding the tax considerations of this transaction.