Part III. Farm Income—Accrual Method

You may be required to use the accrual method of accounting. If you use the accrual method, report farm income when it is due, paid, earned, or taken into account as revenue in its applicable financial statement, not when you receive it. In most cases, you must include animals and crops in your inventory if you use this method. See Pub. 225 for exceptions, inventory methods, how to change methods of accounting, and rules that require certain costs to be capitalized or included in inventory. For information about accounting periods, see Pub. 538.

Chapter 11 bankruptcy. If you were a debtor in a chapter 11 bankruptcy case during 2025, see Chapter 11 Bankruptcy Cases in the Instructions for Form 1040 (under Income ) and the Instructions for Schedule SE (Form 1040).

Lines 38a Through 40c See the instructions for lines 3a through 5c, earlier.

Line 43 See Line 8, earlier.

Some investment isn’t at risk. If some investment isn’t at risk, check box 36b; the at-risk rules apply to your loss. Be sure to attach Form 6198 to your return.

If you also checked the “Yes” box on line E, complete Form 6198 to determine the amount of your loss. The passive activity loss rules don’t apply. See Line 34, earlier, for how to report your loss.

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