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					                                                                                      E-8
                                                                               April 2004

                                  FARM LAW QUIZ *
                                         by
                                  Gerald A. Harrison

                                TABLE OF CONTENTS


 Topics                                                             Page

Drainage                                                                   2

Farmland Leases                                                            2

Farm Fences                                                                2

Contracts, Sales, and Uniform Commercial Code                              3

Liens, Financial Stress and Bankruptcy                                     4

Property, Conveyancing, Property Rights, Condemnation, Zoning, Water
and Environmental Law                                                5

Taxes, Social Security, Retirement, Probate, Estate Planning, and
Business Organization                                                      6

Crimes, Torts, Employees, and Environmental Liability                      8




* "Answers" for this "Quiz" are available from the author.




                                            1
                                                                                                April 2004
                                          Farm Law Quiz
                                                    by
                                            Gerald A. Harrison1
Drainage Law

1. The “common enemy rule” is the law in regard to managing surface water runoff. ___ True ___
False

2. The county surveyor, upon notice, is required to investigate if a landowner complains of a
   plugged drainage tile on the property of a neighbor and shared with that neighbor. ___ True
   ___ False

3. All counties have a “storm water drainage” ordinance. ___ True ___ False

4. A “Permit” from the Army Corp. of Engineers, and/or a permits from certain state agencies may
   be necessary before local authorities may clean or dredge an existing “county” drainage ditch.
   ___ True ___ False

Farmland Leases

5. Farmland leases must be in writing to be valid. __ True __ False

6. All farm tenants are entitled to a written notice to terminate a valid lease. __True __ False

7. How much advance notice is required to end an oral, farmland lease, when no notice provisions
   have been agreed to by the landowner and tenant? (check or circle)

  a.__ five months b.__ three months c.__four months d.__none e. __ Other:
________________.

8. When does the farm lease year begin?                                                            .

9. A landowner must cash rent when he or she retires on Social Security. __True __ False

10. A crop share lease may be the best lease for estate tax purposes. __ True __ False __ Maybe

Farm Fences

11. Which half of a partition (line) belongs to the “Ag Use” landowner?

    a.__ The left half, looking toward the neighbor's property

    b.__ The right half, looking toward the neighbor's property


         1
           This version of the “Farm Law Quiz” was prepared for an Illinois-Indiana presentation by Gerald A.
Harrison, Professor and Extension Economist, specializing in farm legal affairs education. He is a member of
the Indiana State Bar. "Answers" for this "Quiz" are available from the author. Illinois’ law answers are
supplied or edited by Donald L. Uchtmann, Professor of Agricultural Law, University of Illinois, Urbana-
Champaign. Disclaimer: This material and discussion of it are intended for general education and not as
substitute for private legal counsel.



                                                          2
     c.__ Generally, to be negotiated with the neighbor(s)

12. Farmer "B's" corn is damaged by farmer "A's" livestock. They escaped through “A” and “B’s”
    line fence. What may "B" have to show in order to hold "A" liable for damages?
13. Which of the following are true about fences and liability.

a. If a railroad which borders your property, the railroad is required to construct and maintain:

       i.___ All the fence along the railroad.       ii.___ Half the fence along the railroad.

       iii.___ A farmland owner has full responsibility for all fences.

       iv.___ After 30 days notice to the railroad, if the railroad fails to act, the farmer may fix the
             fence       along the railroad and collect from the railroad.

       v. ___ Other:

b. ___ Fence law requires "hog tight" line fences.

c. ___ You can "force" your neighbor to build his or her share of a line fences.

d. ___ You may, under the law, retain your neighbor's runaway animal until you are paid for
damages.

e. ___ The owner of escaped livestock is liable for the damage they cause.

Contracts, Sales, and Uniform Commercial Code (UCC)

14. When is a written contract required for sales of farm commodities?

      __________________________________________________________________________
__

     __________________________________________________________________________
__
15. What other types of transactions are required to be in writing? List two.

      a. ____________________________________________________________
      b. ____________________________________________________________

16. What is the "merchant's exception"
rule?______________________________________________


17. A "merchant" is one who deals in certain goods or by occupation goes about as if he or she
     has the skill or knowledge peculiar to the specific practices and goods involved.
     Is a farmer a merchant? ___ Yes ___ No ___ Maybe.

18 . A farmer (A) agreed to make a landowner's (B) hay crop on shares. "B" selected "A"
      especially because he thought "A" would provide a hay crimper. "A" didn't have a crimper
      when he came to mow, but apparently there was no great objection by "B." Farmer “A” went
      ahead and mowed part of the field and then left.

      The landowner finished preparing the hay to bale, and had another baler lined-up when "A"


                                                        3
     returned with his baler, "B" told "A" to "get lost." "A" asked for $100 to settle. "B" said he
     would think about it. "A" later sued for $2,000, roughly, the value of "his lost share" of he hay.
     Can "A" win in court?

     Explain:


19. If a custom chemical application damages a corn crop in July, the bushels lost, under Indiana
      law, should be valued at:

     a. ___ The price prevailing in July. b. ___ The price the remainder of the crop brings.

     c ___ The price at the time the crop matures.

Liens, Financial Stress, and Bankruptcy

20. What is a lien? _________________________________________________________

21. How does a lender “perfect” a lien on farm collateral (say, crops and livestock raised)?

     _____________________________________________________________________

     _____________________________________________________________________

     _____________________________________________________________________

22. In Indiana, (and, in many other states) what steps must be followed for a farmer's lender to help
      insure repayment of a loan when farm products serve as collateral (as security)?

     a._________________________________________________________

     b._________________________________________________________

     c._________________________________________________________

     d._________________________________________________________

     e._________________________________________________________


23. What is a non-consensual lien? _______________________________________

___________________________________________________________________

24. How does a “mechanic's” lien work? ____________________________________

____________________________________________________________________

25. Why would a farmer want a “no-lien” contract with a general contractor, and how do you set
one up?

____________________________________________________________________


26. A landowner has a cash lease for an unpaid, end-of-year cash rent. When the tenant seeks a


                                                      4
    Chapter 7, liquidation or Chapter 12 reorganization bankruptcy in late January, his “secured”
    lenders have claims for more than the harvested crop is worth. The landowner will get his cash
    rent out of the crop proceeds since he has a preference in the law for unpaid rent. ___ True
    ___ False.

27. A bankrupt farmer can avoid delivering on forward cash contracts only if he liquidates, and not
    if he attempts to reorganize and continue farming under Chapter 11 or 12. ___ True ___False.

28. A person or business may be granted a bankruptcy status only when debts exceed assets.
    ___ True ____ False.

29. A farmer with grain stored and covered by a warehouse receipt in an elevator/warehouse has
    little to worry about if the warehouse goes bankrupt if it is “licensed and bonded” since the
    bond is provided for holders of warehouse receipts. ___ True ___ False.

    But,

Property, Conveyancing, Property Rights, Condemnation, Zoning, Water Law, and
Environmental.

30. What is a
deed?________________________________________________________________

    ___________________________________________________________________________
_

31. How is a “good"(merchantable) title in land established?

____________________________________________________________________________

_____________________________________________________________________________

32. A landowner sells farmland with a land installment contract, with a "strict foreclosure" clause.
    This clause says if the buyer fails to make a payment on time, the seller gets the land back.
    Can the landowner enforce such a clause? ___ Yes ___ No            Maybe.

    Comment:


33. When negotiating with a government agency or a utility who seeks to buy an interest in your
    property which of the following statements are true.
     a.___ The condemning agency (government agency or utility) must furnish a written offer to
            the landowner at least 30 days prior to filing a condemnation suit.

     b.___ There is no way the landowner can question the condemner's right to take or use your
           property when the company or agency has the power of eminent domain.

     c.___ The condemner can make any offer, e.g., "quite low" initially, and then offer more only if
            necessary.

     d.___ The law says if the condemner makes a good faith offer, you must accept it, or expect
           to get the same amount later less the condemner's court costs.

34. In Indiana which of the following is true concerning water law:



                                                      5
        a.___ Licensed well drillers must keep records and send information to the Dept. of Natural
              Resources.
        b.___ A permit is required before a farmer can pump from a navigable river for irrigation.
        c.___ Each farmer along a river or lake can use the water in any way necessary as long as he
              is producing crops or livestock with the water.

        d.___ Indiana has a law that may restrict water use in an affected area.

        e.___ Under the "common enemy"rule a landowner may do anything to move water off his
land.

     f.___ A farmer may be personally liable for spills of hazardous substances in a public
waterway.

35. When a zoning ordinance reduces the potential uses and income from property, the owner
     must be compensated. __ True ___ False ___ Maybe. Comment


36. When a property owner wants an exception to an ordinance, he or she asks for


        37. When a zoning board of appeals issues an adverse final ruling, the landowner may file an
        _______ with the appropriate ___________.

38. If a landowner claims a strip of land because of a mis-located fence, after 10 or more years
      pass, he or she might claim the strip with the theory of ___________ _______________. The
      "shorted"
      neighboring landowner may seek a legal resolution with a law suit to                       .

Taxes, Social Security Retirement, Probate, Estate Planning, and Business Organization

39. Net sales proceeds less "basis" is gain for income tax purposes and is recognized income in
    the year(s) of receipt. ___ True ___ False.

40. A farmer may draw his full entitlement on social security retirement, and keep on farming, as
    long he satisfies a "monthly" test, i.e., if he doesn't work more than 40 hours in a month. __
    True __ False.

41. If a landlord materially participates through a farmland lease, he or she pays self-
    employment (FICA) tax: a.___ until his or her social security retirement. b.___ until age 70.
    c.___ Until material participation stops.

42. In order for farmland to be eligible for special use valuation (SUV) for federal estate tax
    purposes several conditions must be satisfied:

    a. ____________________ b. ______________________
    c.______________________________

    d. _______________________ e. ______________________ f.
__________________________

    What is the valuation method or formula may be used for SUV?
43. You should have an estate probated in order to have “good” title to inherited property.
    ___ True ___ False.



                                                       6
44. An heir has nothing to say about the fee a lawyer charges to settle an estate. ___ True ___
False

45. If a husband and wife have joint (right of survivorship) ownership of: a bank account, a car, 200
    acres and $100,000 insurance on the husband and $20,000 on the wife, and two children.
    Check the “true” statements.

    a.___ There may be no important reason for each husband and wife to have a will.

    b.___ If husband dies, there's no inheritance tax on the insurance.

    c.___ If husband dies and there's no will, the surviving spouse will get the “household items.”

    What questions may be raised about the above estate(s)?

    1.                                                    2.
    3.                                                    4.


46. A will written in another state is not valid in Indiana. ___ True ___ False, ___ Maybe

47. If a wife buys insurance on her husband's life, she may avoid federal estate tax on the
    proceeds when he dies. ___ True ___ False

48. When a person marries the second (or third ...) time with children from a prior marriage, upon
    that person's death without children by the final spouse and without a will: (check the true
    statement)

    a.___ A valid disclaimer by the surviving spouse may keep the surviving spouse from taking
    part of the deceased spouse's estate.

    b.___ The second (final) spouse will be entitled to as much as from the deceased spouse's
     estate as a first surviving spouse with children.

     c.___ If the person has no will, but has children from a prior marriage, his or her second or
     subsequent childless spouse is entitled by the law of descent to 50% of the personal property
     and 50% life income from the real estate of a deceased spouse (as of Sept. 1, 1987).

49. Which statements are true about farm corporations in Indiana?
     a.___ It takes at least two stockholders to set-up one.

     b.___ Corporations are the “only way to go” to make gifts of farmland.

     c.___ You may be able to reduce both FICA tax (compared to self-employment tax).
     d.___ Your land, machinery and livestock must be combined in one corporation.

50. All partners in a general partnership may be entitled to an equal vote in management.
                                                                                ___ True ___ False

51. Which of the following statements are true?

   a.___ If my farm is in a trust, a bank trustee will have to be paid.

   b.___ I can't be trustee of a trust that pays income to me.



                                                      7
     c.___ A trust in a deceased spouse’s estate may save estate taxes in a surviving spouse's
     estate.
     How?


52. "C,” "D," and "E" (who are brothers and a ster) own a farm as joint tenants with rights of
    survivorship. "C" deeded his interest to "D." "D" died. "D's" will left her property to Purdue
    University, her Alma Mater!
    "E" asks if Purdue has a legal interest in the farm. What is your response, and why?
     Comment:___________________________________________________________________
     ___

     ____________________________________________________________________________
__

     From a transfer control point of view, what is a major problem with unrestricted co-ownership of
     business property?
     ___________________________________________________________________________

53. If a parent deeds a farm to his children, but keeps the right to the income as long as he or she
lives,
    this arrangement is called a
_____________________________________________________.

      Which of the following are true about the above arrangement?

     a.___ There is a gift at the time of the deed.

     b.___ Avoids probate of the farm.

    c.___ Keeps the farm out of the parent’s estate for both probate and death (estate and
    inheritance) tax purposes.
    Comments:
Crimes, Torts, Employees and Environmental Liability
54. Upon returning home, you "catch" someone who appears to have broken into your house, and
is in the driveway loading your color TV. You are within your legal rights in Indiana to use whatever
force necessary to stop the "burglar." ___ True ___ False.

55. A guard dog is one of the best ways to prevent theft from the farmstead.
   ___ True ___ False.

56. What can a farmer do to prevent theft on a farm?

a.______________________________ b._____________________________

c.______________________________ d._____________________________

57. A farmer is not liable for any injury to a person on his property. ___ True   False.

58. What do you have to show in a negligence law suit in order to win?

     a.______________________________ b._____________________________

     c.______________________________ d.______________________________

     e.                                          f.

                                                      8
59. If there is injury to your land or buildings from nearby construction blasting, to recover damages
you must show negligence in the use of the dynamite. ___ True ___ False.
60. A farmer will not be held liable for damages to a neighbor's crop that resulted from aerial
application of chemicals if the applicator is an independent contractor. ___ True ___ False.

61. Farms, like other businesses, do not have to be concerned about lawsuits brought by injured
employees since Workman's Compensation law limits the amount an employee may recover.
    ___ True ___ False.

62. A farmer has a greater exposure to liability claims from a "U-pick” customer than for his mother
who is visiting and helping pick the "leftover." ___ True ___ False.

63. In determining premises liability, the duty owed the party in common law varies depending on
whether he or she is: ___ a trespasser; ___ an invitee; or ___ a licensee. Place a 1, 2, or 3
before each to establish to whom the highest degree of protection is owed, where 1 is highest and
3 lowest.

64. The attractive nuisance doctrine deals with landowner liability for injuries to trespassing
__________.

65. Residential neighbors may be able to obtain an injunction to stop or move a livestock operation
based on the livestock presenting a                                   .


66. Generally, what may a purchaser presume about consumer goods or commodities or
equipment routinely purchased in the marketplace without stated warranties.

67. The common law in Indiana is that, in general, a dog is entitled to one free bite. ___ True ___
False.

68. What if your dog bites and injures a postman or deputy sheriff? __

69. The tenant-operator may be liable to bystanders or neighbors for injury from chemicals carried
by the wind if he was “following the label.” ___ True ___ False.

70. Sellers of land may be required to disclose contamination on the land resulting from various
controlled and restricted use substances. ___ True ___ False.

71. A farmer may need a _________________ to determine his exposure to environmental liability.

72. Must a landowner be compensated for substantial restrictions on wetlands imposed by federal
and state? ___Yes ___ No. Explain




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