ABSTRACT
Tax-loss farming—or how to lose at farming and still make a profit—is one source of federal subsidy to corporations and wealthy urban investors. Rather than work the land—a hazardous business in the best of years—they milk the tax laws. Three major features of the tax code allow wealthy investors to obtain substantial windfalls: cash accounting, deductible capital expenditure, and capital gains. When farm assets are sold, taxes must be paid on any profit resulting from the transactions. The effects of tax-loss farming are unfair competition to bona fide farmers, higher land prices, overproduction of certain crops, expansion to larger-than-efficient farm sizes, absentee ownership, and the demise of family farms. Tax-loss farming allows corporations and high-income persons to receive preferential treatment from the Internal Revenue Service, solely because of their large incomes. The capital involved in tax-loss farming is absentee capital.
