Bski, I tried researching your reimbursement check through my tax research system and can't find an appropriate citing. If you can you send me a link that describes what the program is I would be happy to do some research for you.
Generally if a check is a reimbursement check then you can offset any expenses against the reimbursement check up to the extent of the income and accordingly wipe out any taxable income. If you do not have a business related to the income (think farm schedule) then you cannot take a tax deductable loss but you may be able to offset the income with expenses. I do not know if that is the case here. I am not an expert in farm taxation and it has a large and unique section of Internal Revenue Code that I don't have a lot of interaction with.
If you can give me more info then I would be more than happy to help out your cause with some tax research.
I'm too groggy this morning to attach a disclaimer so please consider this post properly disclaimed.
