Section 126 Cost-Share Exclusion

The form below can be used to calculate the "excludable portion" of a cost-share payment received under one of the programs listed in Section 126(a) of the Internal Revenue Code. If you received cost-sharing payments under a program not listed in Sec. 126(a), please consult your State forestry official, the IRS or USDA Farm Service Agency, new programs are occasionally added to the list.

Before you get started there are some terms that may be useful in completing the following form:

Total cost - The total cost of the improvement is the sum of the amounts paid by the government and the taxpayer, whether or not with borrowed funds, for the improvement.

Non-Section 126 payments - These are payments received under a listed program, but which the Secretary of Agriculture has not determined to be primarily for approved purposes.

Fair Market Value - The fair market value of the improvement is the amount by which the fair market value of the portion of the property improved is increased by the improvement.

Please round all numbers to the nearest whole dollar (for example: $4,567.89 would be entered as 4,568), and if a particular question does not apply please enter 0.

Step 1: Determine the Section 126 Cost

Enter the "Total Cost" of the Section 126 Improvement:

Enter the total contributions provided by the taxpayer (this is the difference between the "total cost" and the amount of the cost-share payment:

Enter any payments received under a program "not" listed in Section 126:

Enter any Non-Section 126 payments: (These are payments that are received under a listed program, but which the Secretary of Agriculture has not determined to be primarily for approved purposes)

Enter any portion of a government payment in the nature of rent, or for services rendered by the recipient in making the improvement:

Step 2: Determine value of Section 126 Improvement

Enter the Fair Market Value" of the improvement:

Enter the interest rate for your district (the interest rates are listed below):

Step 3: Calculate the excludable portion of the cost-share payment

Enter the total income received from the affected acreage for the 3 years prior to the installation of the improvement (if you did not receive any income from the affected acreage in the 3 years preceding the improvement enter 0:

Enter the total number of acres affected by the improvement:

Farm Credit Bank Discount Rate

The Internal Revenue Service publishes the discount rates in a Revenue Ruling each spring, April or May, to be used for that year. The rates vary based on the district in which you live. Listed below are the interest rates for the different districts and the listing of states in each of the districts. The rates that are to be used for 2009 are published in Revenue Ruling 2009-21.

INTEREST RATES
(Year of Valuation 2009)

Farm Credit System Bank Servicing State in Which Property is located	Location of Property	Rate
AgFirst, FCB	Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, Pennsylvania, South Carolina, Virginia, West Virginia.	7.63
AgriBank, FCB	Arkansas, Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee, Wisconsin, Wyoming.	6.50
CoBank, ACB	Alaska, Connecticut, Idaho, Maine, Massachusetts, Montana, New Hampshire, New Jersey, New York, Oregon, Rhode Island, Vermont, Washington.	6.17
Texas, FCB	Alabama, Louisiana, Mississippi, Texas.	6.59
U.S. AgBank, FCB	Arizona, California, Colorado, Hawaii, Kansas, New Mexico, Nevada, Oklahoma, Utah.	6.23

Interest Rates for previous year: 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007