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Taxlink by Andy Biebl
Andy Biebl DTN Tax Columnist
Thu Aug 14, 2014 06:39 AM CDT

Hedging, when done properly, is designed to minimize price risk for commodity producers. But while economic risk might be minimized, IRS risk can increase.

The tax law defines a hedge as a transaction in the normal course of business to minimize the risk of price change with respect to inventory or supplies. This requires a producer to have a hedging position that's opposite the physical position on the farm and within normal production ranges. For example, if a producer in the middle of the summer growing season is concerned about a potential decline in the corn price, his physical long ...

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