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Abstract
Net farm income has shown a generally downward trend since the postwar highs of 1947
and 1948. Even with allowance for nonfarm sources of income and for declining numbers
of farms, average farm family income has lagged behind the steadily rising levels
of nonfarm family incomes. But the farmer has had an additional return of sorts in the
increased capital value of his assets—farm land and buildings and, to a lesser extent, working
capital. Such increments in capital value are not included in regular estimates of gross
and net farm income because the latter are designed specifically to measure returns from
farming operations only. Capital gains and losses are purposely omitted from the estimates
of income from farming. Capital gains and losses are referred to here in their
general economic sense of changes in capital values associated with price changes, not in
any specific tax sense. There is a difference of opinion among economists as to the desirability
of lumping capital gains and losses with ordinary income. But some agricultural
economists would argue that farm capital gains have been a clearly recognizable supplement
to farm incomes in recent years, and most would probably concede that capital gains
or losses have some bearing on the economic welfare of farm operators and their families,
especially owner operators. Reasonably satisfactory information is available for an
assessment of the approximate magnitude and general significance of farm capital gains
and losses. Without necessary commitment to either side of the argument, therefore, it
is the purpose of this study: First, to raise the basic question concerning farm capital
gains and losses; second, to discuss some of its implications in terms of various possible
answers; and third, to develop estimates of the average amounts involved annually in the
last 20 years.