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Saving for a rainy day

Congress is considering a program of tax-deferred savings for farmers tohelp them build a cash reserve for times of low income. The program wouldallow farmers to deposit income into a Farm and Ranch Risk Management(FARRM) account during years of high farm income, which they could thendraw upon during years of low income.

Contributions to the fund would not be subject to federal income taxes, buttaxes would be assessed when funds were withdrawn. Under the proposalcurrently being considered, farmers could take a federal income taxdeduction for FARRM deposits of up to 20 percent of eligible farm income. Depositscould stay in the account for up to five years; deposits remaining afterthe five-year period would incur a 10 percent penalty. There would be no price orincome rules to dictate when funds could be withdrawn from the account;withdrawals would be at the farmer's discretion.

Experts fear, however, that the program might benefit only high-incomefarmers. Contact Econom-ic Research Service, USDA, Dept. FIN, 1800 M St.N.W., Room 2177, Washington, DC 20036.

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