As the proportion of farm family income due to nonfarm sources continues to grow nationally, it is important to understand how farm families in various regions or states are affected. This paper develops a better understanding of the contribution of income from nonfarm sources to the level and distribution of income among farm families in New York. In analyzing income distribution, the Gini ratio is decomposed to determine the effects of marginal changes in income by source to overall inequality. The results are compared with the simulated changes in income inequality due to changes in income by source as measured by an "adjusted" Gini ratio which accounts specifically for negative farm incomes. Differences in the policy implications from both procedures are compared. The relationships among sources of income and policy implications can be brought into sharper focus by examining both measures.