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Market Assistance Loans (MALs): Farm Business Taxes (2025 IRS Guide)

This guide covers “Market Assistance Loans (MALs)” within farm business taxes. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 225 (2025), Farmer's Tax Guide, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

You must include in income most government payments, such as those for approved conservation practices, livestock indemnity payments, or livestock forage disaster payments whether you receive them in cash, materials, services, or commodity certificates. However, you can exclude from income some payments you receive under certain cost-sharing conservation programs if there is a corresponding reduction in basis of a related improvement. See Cost-Sharing Exclusion (Improvements), later.

Report the agricultural program payment on the appropriate line of Schedule F, Part I. Report the full amount even if you return a government check for cancellation, refund any of the payment you receive, or the government collects all or part of the payment from you by reducing the amount of some other payment or Market Assistance Loans (MALs). However, you can deduct the amount you refund or return or that reduces some other payment or loan to you. Claim the deduction on Schedule F, Part II, for the year of repayment or reduction.

Market Assistance Loans (MALs)

Generally, you don’t report loans you receive as income. However, if you pledge part or all of your production to secure a MAL, you can treat the loan as if it were a sale of the crop and report the loan proceeds as income in the year you receive them. You don’t need approval from the IRS to adopt this method of reporting MALs.

Once you report a MAL as income for the year received, you must generally report all MALs in that year and later years in the same way. However, you can obtain for your tax year an automatic consent to change your method of accounting for loans received from the Commodity Credit Corporation (CCC), from including the loan amount in gross income for the tax year in which the loan is received to treating the loan amount as a loan. For more information, see Part I of the Instructions for Form 3115 and Revenue Procedure 2008-52. Revenue Procedure 2008-52, 2008-36 I.R.B. 587, is available at
IRS.gov/irb/2008-36_IRB#NOT-2008-52.

.You can request income tax withholding from MAL payments you receive. Use Form W-4V. See How To Get Tax Help for information about ordering the form..

To elect to report a MAL as income, include the loan proceeds as income on Schedule F for the year you receive it. Attach a statement to your return showing the details of the loan.

You must file the statement and the return by the due date of the return, including extensions. If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Attach the statement to the amended return and write “Filed pursuant to section 301.9100-2” at the top of the return. File the amended return at the same address you filed the original return.

When you make this election, the amount you report as income becomes your basis in the commodity. See chapter 6 for information on the basis of assets. If you later repay the loan, redeem the pledged commodity, and sell it, you report as income at the time of sale the sale proceeds minus your basis in the commodity. If the sale proceeds are less than your basis in the commodity, you can report the difference as a loss on Schedule F.

If you forfeit the pledged crops to the CCC in full payment of the loan, the forfeiture is treated for tax purposes as a sale of the crops. If you didn’t report the loan proceeds as income for the year you received them, you must include them in your income for the year of the forfeiture.

Form 1099-A.

If you forfeit pledged crops to the CCC in full payment of a loan, you may receive a Form 1099-A. “CCC” should be shown in box 6. The amount of any MAL outstanding when you forfeited your commodity should also be indicated on the form.

Market Gain

Under the CCC nonrecourse marketing assistance loan program, your repayment amount for a loan secured by your pledge of an eligible commodity is generally based on the lower of the loan rate or the prevailing world market price for the commodity on the date of repayment. If you repay the loan when the world price is lower, the difference between that repayment amount and the original loan amount is market gain. Whether you use cash or CCC certificates to repay the loan, you will receive a Form 1099-G showing the market gain you realized. Market gain should be reported as follows.

  • If you elected to include the MAL in income in the year you received it, don’t include the market gain in income. However, reduce (adjust) the basis of the commodity for the amount of the market gain.

  • If you didn’t include the MAL in income in the year received, include the market gain in your income.

The following examples show how to report market gain.

Example 1.

Mike Green is a cotton farmer. He uses the cash method of accounting and files his tax return on a calendar-year basis. He has deducted all expenses incurred in producing the cotton and has a zero basis in the commodity. In 2024, Mike pledged 10,000 pounds of cotton as collateral for a MAL of $5,200 (a loan rate of $0.52 per pound). In 2025, he repaid the loan and redeemed the cotton for $4,000 when the world price was $0.40 per pound (lower than the loan amount). Later in 2025, he sold the cotton for $6,500.

The market gain on the redemption was $0.12 ($0.52 – $0.40) per pound. Mike realized total market gain of $1,200 ($0.12 x 10,000 pounds). How he reports this market gain and figures his gain or loss from the sale of the cotton depends on whether he included MALs in income in 2024.

Included MAL.

Mike reported the $5,200 MAL as income for 2024 on Schedule F, line 5a, so he is treated as if he sold the cotton for $5,200 when he pledged it and repurchased the cotton for $4,000 when he redeemed it. The $1,200 market gain isn’t recognized on the redemption. He reports it for 2025 as an agricultural program payment on Schedule F, line 4a, but doesn’t include it as a taxable amount on line 4b.

Mike’s basis in the cotton after he redeemed it was $4,000, which is the redemption (repurchase) price paid for the cotton. His gain from the sale is $1,200 ($5,200 – $4,000). He reports the $5,000 sale on line 1a and the $4,000 basis on line 1b. After subtracting his basis from the sale, Mike will have a $1,200 gain for 2025 on Schedule F, line 1c.

Excluded MAL.

Mike didn’t elect to report the $5,200 MAL as income and therefore didn’t include it on his 2024 Schedule F. When he paid $4,000 to pay off the loan in 2025, he had to recognize $1,200 of income from market gain.

Example 2.

The facts are the same as in Example 1, except that, instead of selling the cotton for $6,500 after redeeming it, Mike entered into an option-to-purchase contract with a cotton buyer before redeeming the cotton. Under that contract, Mike authorized the cotton buyer to pay the MAL on Mike’s behalf. In 2025, the cotton buyer repaid the loan for $4,000 and immediately exercised his option, buying the cotton for $4,000. How Mike reports the $1,200 market gain on the redemption of the cotton and figures his gain or loss from its sale depends on whether he included MALs in income in 2024.

Included MAL.

As in Example 1, Mike is treated as though he sold the cotton for $5,200 when he pledged it and repurchased the cotton for $4,000 when the cotton buyer redeemed it for him. The $1,200 market gain isn’t recognized on the redemption. Mike reports it for 2025 as an agricultural program payment on Schedule F, line 4a, but doesn’t include it as a taxable amount on line 4b.

Also, as in Example 1, Mike’s basis in the cotton when the cotton buyer redeemed it for him was $4,000. Mike has no gain or loss on its sale to the cotton buyer for that amount.

Excluded MAL.

As in Example 1, Mike didn’t report the $5,200 loan as income in 2024 and must recognize $1,200 of income from market gain in 2025.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

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