Overview
In today’s random thoughts blog article, I am writing about several questions that I have answered recently from those that have emailed, written (yes, I do get handwritten letters) called, or have talked with me while I have been out on the speaking tour. It’s random commentary, but hopefully you’ll find it interesting, if not helpful.
Some random thoughts – it’s the topic of today’s post.
What’s in a Legacy?
A legacy is something that is created for future generations. It could be landholdings, leadership roles as well as finances. It can also include faith, values and reputation. What are you creating for your legacy?
To many farm families, leaving a legacy for subsequent generations is important. Often that involves land ownership, but a legacy can involve much more. A legacy also involves your character. Each day is an opportunity to build a more positive legacy to influence future family generations. Think about leaving a letter or written statement that provides current and future family generations with your wisdom and vision, and maybe even also your permission to make changes to the farming operation as situations change.
All of this dovetails into estate and business planning. Give consideration to the best structure for your farming business to succeed into future generations. A buy-sell agreement can be a key component to building a solid transition plan. And if you don’t do so already, get the family together at least annually. Include those that don’t necessarily have the same passion for the farm business that you have. And maybe, think about creating a donor-advised fund or a private foundation to help family members that need a boost.
Your legacy is more than just the “stuff” you own. It includes the choices you make that influence the future trajectory of your family and business.
Liability for Blowing Dirt
Occasionally, there are news reports about traffic accidents due to blowing dirt from farm fields. It tends to happen in the Spring during planting season when high winds blow dirt across a roadway and severely limit visibility. That raises a legal question – is a farmer or other rural landowner responsible for injuries or death resulting from accidents where blowing dirt from their field is a factor?
The matter of soil erosion from farm fields has been a concern of the federal and state governments for many years. Federal programs designed to address soil erosion were first established as a result of the 1930s Dust Bowl, and some state laws also go back that far.
State provisions typically require landowners to take certain actions designed to minimize soil erosion. In Kansas, for example, county commissioners can take action to minimize soil erosion. The Iowa statute was upheld in 1979 against a constitutional challenge.
But what about the liability issue for a farmer who owns land adjacent to a roadway? The answer is that a farmer will generally not be liable for injuries or death resulting from obscured visibility due to blowing dirt if the farmer is in compliance with an approved soil conservation plan for the farm or is otherwise using generally accepted good farming practices. The same is true for blowing dust from harvest activities.
Accessing Landlocked Parcels
The issue of accessing landlocked property is not uncommon in rural settings. How can access be obtained? Is it possible that your access to a parcel could be blocked?
Sometimes agricultural land is landlocked with no access to a public roadway. This can happen in several ways, but often arises when a portion of a tract is sold off resulting in a landlocked parcel. In that event, how does the new owner get access? There are generally two possibilities.
First, the law may imply the existence of an easement from prior use if a landowner sells part of a tract and before the sale there was a usage on the land that, had the two tracts then been severed, could have been the subject of an easement that was required to use the adjacent parcel.
In addition, the law may imply an easement based on necessity if the facts involve a conveyance of a physical part of the grantor’s land, and after severance of the tract into two parcels, it is “necessary” to pass over one of them to reach a public road from the other. In this situation, no pre-existing use needs to be present. Instead, the severance creates a land-locked parcel unless its owner is given implied access over the other parcel.
Ag land transactions should have any access easements specifically agreed upon in writing and recorded on the land records. This can help avoid future disputes.
What is a Trade or Business?
If your farming business is a sole proprietorship engaged in a trade or business and is not a hobby, you can deduct such things as business expenses and net operating losses. But you also must pay self-employment tax on your income. But, how do you know if your activity is a trade or business in the eyes of the IRS?
Whether your activity is a trade or business is based on all of the facts. Being engaged in the activity on a full-time basis that is regular and continuous is the key. The issue came up again in a recent Tax Court case. In Root v. Comm’r., T.C. Memo. 2025-51, taxpayers deducted several million dollars’ worth of net operating losses related to the closure or abandonment of a guest lodge project on their property. The IRS disallowed the losses claiming that they weren’t engaged in a trade or business involving the lodge.
The Tax Court agreed, finding that the lodge never functioned as a going concern and was never capable of hosting paying guests. Simply buying a site and starting construction isn’t enough. They needed to at least advertise and seek renters. Their hosting on the property was also occasional and isolated, and they had income from other activities. Without a trade or business activity, there couldn’t be a deductible loss.
Losses from an investment activity that “goes awry” before the business begins are not deductible trade or business losses.
Conclusion
Well, those are some random thoughts for this time. There’ll be more next time.